Ukraine Sees Russian Invasion as Rebel Assaults Intensify

Aug. 28 (Bloomberg) – Eurasia Group President Ian Bremmer discusses the escalating conflict in Ukraine and why the country is essentially at war with Russia. He speaks on Bloomberg Television's “Bloomberg Surveillance.” (Source: Bloomberg)

Ukrainian President Petro Poroshenko called an emergency security meeting to defend against what he called a “de facto” Russian incursion after separatists gained ground in intensified fighting.

Poroshenko canceled a state visit to Turkey to coordinate Ukraine’s military response to the “sharp deterioration” of events in rebel-held territory, he said on his website today. Stocks and futures from Moscow to New York extended declines.

France and Germany threatened President Vladimir Putin with tougher sanctions after pro-Russian insurgents widened their attacks, taking several towns outside their strongholds of Donetsk and Luhansk, including near the Sea of Azov. That opened a new front and a seaborne supply channel for the rebels, said Anton Herashchenko, an adviser to Ukrainian Interior Minister Arsen Avakov. The U.S. said Russia may be directing the attacks, falling short of calling it an invasion.

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“The invasion by Putin of the regular Russian army is a fait accompli,” Herashchenko said on his Facebook page today. The Foreign Ministry in Lithuania, a former Soviet satellite state now in the European Union, said it “strongly condemns the invasion of Ukrainian territory by the Russian Federation military forces, which has obviously begun.”

Photographer: Francisco Leong/AFP via Getty Images

Pro-Russian fighter stand in Troitsko-Khartsyzk, 30 Km east of Donetsk, on Aug. 28, 2014. Close

Pro-Russian fighter stand in Troitsko-Khartsyzk, 30 Km east of Donetsk, on Aug. 28, 2014.

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Photographer: Francisco Leong/AFP via Getty Images

Pro-Russian fighter stand in Troitsko-Khartsyzk, 30 Km east of Donetsk, on Aug. 28, 2014.

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The five months of unrest have sparked the worst standoff between Russia and its former Cold War foes in two decades and unleashed sanctions on both sides. Violence surged a day after Putin and Poroshenko met in Minsk, Belarus. Putin hailed the talks as a step toward peace, though he said cease-fire terms weren’t discussed because Russia isn’t a party to the conflict.

Standoff in Ukraine

Putin used that meeting in Minsk, which included EU officials, to gauge whether Ukraine’s leadership was prepared militarily for an outright invasion, Ievgen Vorobiov, an analyst at the Polish Institute of International Affairs in Warsaw who studies Ukraine, said by phone.

“I think he got the message from Poroshenko’s and the EU’s willingness to negotiate, even on such superficial issues as hostage exchanges, that they weren’t prepared,” Vorobiov said. “So he decided to act more quickly than Poroshenko expected. This is the beginning of an open Russian invasion using regular army units. This is war.”

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Ukrainian Prime Minister Arseniy Yatsenyuk issued a plea for international help in defending against Russia’s army, which he said “is armed to the teeth.” Sanctions by the U.S. and the EU aren’t working, Yatsenyuk told reporters in Kiev, urging a global freeze on Russian assets and financial transactions until Putin withdraws all his troops.

Photographer: Sergei Grits/AP Photo

Local residents watch as smoke rises during shelling in Novoazovsk, eastern Ukraine, on Aug. 27, 2014. Close

Local residents watch as smoke rises during shelling in Novoazovsk, eastern Ukraine, on Aug. 27, 2014.

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Photographer: Sergei Grits/AP Photo

Local residents watch as smoke rises during shelling in Novoazovsk, eastern Ukraine, on Aug. 27, 2014.

Russia, which denies involvement in a conflict that’s claimed more than 2,000 lives, faces more sanctions if the escalation of fighting continues, according to French President Francois Hollande and German Chancellor Angela Merkel.

“Russia can’t at the same time aspire to be an accepted power of the 21st century and not respect the rules,” Hollande said at an annual meeting of French ambassadors in Paris today. Merkel said yesterday that further penalties may be needed “to give added political weight to our demands.”

Jen Psaki, the U.S. State Department spokeswoman, cited the reports of fresh fighting, telling reporters in Washington that “these incursions indicate a Russian-directed counteroffensive is likely under way in Donetsk and Luhansk.”

Putin’s spokesman, Dmitry Peskov, said yesterday “this information doesn’t correspond with reality.” Today, Peskov declined to comment on Ukrainian claims of an invasion or rebel statements about Russian soldiers joining the war.

War Vacation

The prime minister of the self-proclaimed Donetsk People’s Republic, Alexander Zakharchenko, said “many” retired Russian military personnel are in the region to fight alongside rebel forces, seeing it as their “duty.” There are also “many” active-duty Russian soldiers who choose to join the fight when they are on leave, he said on Russian state television.

Photographer: Mstislav Chernov/AP Photo

Women rush across the street after shelling in the town of Donetsk, eastern Ukraine, on Aug. 27, 2014. Close

Women rush across the street after shelling in the town of Donetsk, eastern Ukraine, on Aug. 27, 2014.

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Photographer: Mstislav Chernov/AP Photo

Women rush across the street after shelling in the town of Donetsk, eastern Ukraine, on Aug. 27, 2014.

“We have never concealed the fact that there are many Russians among us and without them it would be very hard and difficult to fight today,” Zakharchenko said.

Ukraine’s dollar bonds due July 2017 fell for a seventh straight day, pushing the yield up 62 basis points to 11.54 percent, the highest in more than three months. Investors holding the debt have lost 3.8 percent this month, the most after Argentina, Venezuela among all nations tracked by the Bloomberg Dollar Emerging Market Sovereign Bond Index.

Russia’s Micex Index of 50 stocks lost 2.1 percent to 1,417.42 as of 5 p.m. in Moscow, the biggest intraday slide in a month. The ruble fell 1.8 percent to 36.8065 per dollar, the weakest since 2003, date compiled by Bloomberg show.

Death Toll

Ukraine’s military said yesterday that its forces killed 225 rebels and destroyed three tanks in the previous 24 hours. Thirteen government soldiers were killed and 36 wounded, a military spokesman, Andriy Lysenko, said at a briefing in Kiev.

Ukrainian troops are also fighting to maintain control of Ilovaysk, east of Donetsk, and two other towns, the military press service said on Facebook. There was no independent confirmation of the military figures for separatist deaths.

“The Russians are all about process and are clearly playing for time to reinforce separatist positions or put in more troops and arms,” Joerg Forbrig, senior program officer for central and eastern Europe at the Berlin bureau of the German Marshall Fund of the U.S., said by phone.

To contact the reporters on this story: Kateryna Choursina in Kiev at kchoursina@bloomberg.net; Volodymyr Verbyany in Kiev at vverbyany1@bloomberg.net; David McQuaid in Warsaw at dmcquaid1@bloomberg.net

To contact the editors responsible for this story: James M. Gomez at jagomez@bloomberg.net Brad Cook, Paul Abelsky

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