March 16 (Bloomberg) -- A majority of Crimeans chose to join Russia in a disputed referendum, exit polls showed, deepening the worst crisis between Russia and the West since the end of the Cold War.
A total of 93 percent voted today in favor of leaving Ukraine to become part of Russia, the Republican Institute of Social and Political Studies said, citing exit polls from the vote in the Black Sea peninsula. The Ukrainian government, the European Union and the U.S. all consider the referendum illegal. About 1.5 million Crimean voters were eligible to take part, according to the region’s prime minister.
As the West threatens to ratchet up sanctions if Russia doesn’t back down from annexing Crimea, Russia has deployed about 60,000 troops along the Ukrainian border, the government in Kiev said. Ukraine closed border crossings to Russia and will mobilize as many as 15,000 volunteers in the next 15 days to defend the nation, officials said today.
“We’re on the brink of a new cold war where Europe’s view of Russia as a benign nation that could be integrated economically and politically has become history,” Fredrik Erixon, director of the European Centre for International Political Economy in Brussels, said by phone.
In Washington, the White House said in a statement the international community “will not recognize the results of a poll administered under threats of violence and intimidation from a Russian military intervention.”
“Russia’s actions are dangerous and destabilizing,” according to the White House statement. “Military intervention and violation of international law will bring increasing costs for Russia.”
U.K. Foreign Secretary William Hague called the vote “illegal, unconstitutional and illegitimate.” In an e-mailed statement, Hague said the EU would need to make “a firm and united response” to Russia.
Reports of Russia’s increasing military presence follow accusations by Ukraine yesterday that its neighbor’s troops entered the Kherson region on the Azov Sea from the Crimea peninsula they already occupy. The Foreign Ministry in Kiev issued a statement protesting the seizure by Russian soldiers of the village of Strilkove. In Berlin, German Chancellor Angela Merkel issued a statement today condemning the operation “on the Ukrainian mainland” with “Russian troops.”
Analysts, including Nicholas Spiro, London-based managing director at Spiro Sovereign Strategy, said Russian assets are “the biggest casualty” of “China and Crimea, the two key factors shaping market sentiments right now.”
“Putin’s intervention in Ukraine is pulling the rug from under Russian assets -- with the country’s normally stable bond market looking more vulnerable with each passing day,” Spiro said in an e-mailed note.
Lilit Gevorgyan, senior economist at IHS Global Insight in London, said that “currency and equity markets have already been punishing the Russian ruble and companies and the talk of EU sanctions is only fueling capital flight.”
A majority of Crimea’s residents are ethnic Russians and the referendum didn’t offer the alternative of maintaining a united Ukraine.
“I voted for Russia as only Russia can save us from war in the region,” Nadezhda Kolkina, a 64-year-old retiree, said near a polling station in the region’s capital, Simferopol, as banners proclaiming “Together with Russia” festooned the surrounding area. “I am crying because this is a special day.”
Crimean Premier Sergei Aksenov told reporters that the peninsula may become part of Russia next week, though full integration may take a year. Crimea will switch to the Russian ruble and abandon Ukraine’s hryvnia on April 1, RIA Novosti cited Crimean Deputy Prime Minister Rustam Temirgaliev as saying today.
While the EU and the U.S. are threatening to tighten sanctions against Russia, President Vladimir Putin called the referendum legal and spoke with Merkel today to tell her that Russia will respect the choice made by Crimea.
Arizona Senator John McCain said in a CNN interview that President Barack Obama is giving “serious consideration” to sending military aid to Ukraine. Connecticut Senator Chris Murphy, in an ABC interview, said the U.S. should pass “crippling sanctions” on Russia and help Ukraine rebuild its armed forces.
While most attention shifted to Crimea today, rallies were held in eastern Ukrainian cities including Kharkiv and Donetsk. Pro-Russian activists stormed the regional prosecutors’ office building in Donetsk and raised the Russian flag, according to a live broadcast.
“The Crimean peninsula is the prelude to wider and much more geo-political tensions over the fate of the Ukrainian mainland,” Spiro said.
The latest reports of Russian military activity beyond Crimea’s borders in eastern Ukraine have heightened concerns that Putin plans to extend his reach in Ukraine.
“We can rule out that Putin will limit himself to Crimea,” Joerg Forbrig, a senior program officer at the Berlin bureau of the German Marshall Fund of the U.S., said in a phone interview. “There is no prospect of self-restraint on the part of Putin’s Kremlin.”
Russia yesterday vetoed in the United Nations Security Council a resolution proposed by the U.S. that declared the referendum illegal and stressed the need for political dialogue to resolve the crisis. In New York, 13 members of the Security Council backed the resolution and China abstained.
In a continuing sign of tensions in Crimea, 25 unidentified people including eight gunmen arrived last night at Ukraine’s petroleum storage in Crimea, which was seized earlier, and said they were acting on the orders of the local government as they prepared to pump out fuel, Vladyslav Seleznyov, a spokesman for Ukraine’s Defense Ministry in Crimea, said on his Facebook Inc. page.
As many as 130 Russian soldiers are in Strilkove, in eastern Ukraine, digging trenches and doing “other engineering work,” said Oleh Slobodyan, a spokesman for the Border Guard Service. The Russians have three armored personnel carriers and are in control of a Ukrainian natural gas pumping station, he said.
No military confrontations between Ukraine and Russia have occurred so far, he said.
Putin’s government contends ethnic Russians in Crimea are at risk after the ouster last month of President Viktor Yanukovych, an assertion that Ukraine’s new leaders deny. The Kremlin supports Crimea’s recently appointed administration, which organized today’s referendum.
“Preparations are already under way to incorporate Crimea into Russia,” Sergei Markov, a Kremlin adviser and vice rector of the Plekhanov Russian University of Economics in Moscow, said in a telephone interview from Sevastopol yesterday.
Russian lawmakers are scheduled to consider legislation March 21 that would allow Russia to incorporate parts of countries where the central authority isn’t functioning and local residents want to secede, he said.
The bill isn’t needed to make Crimea part of Russia because the region already declared independence from Kiev, according to Markov. It would allow for the annexation of parts of eastern Ukraine, though Russia would only want to do that if it’s sure “we are welcomed with flowers,” he said.
Russian stocks posted the biggest weekly drop since May 2012, with the Micex Index sliding 7.6 percent to 1,237.43 on March 14, the lowest level since May 2012. The Standard & Poor’s 500 Index of U.S. stocks fell 2 percent last week to 1,841.13, erasing its gains for the year. The UX index of Ukrainian stocks was down 7.1 percent for the week.
U.S. Vice President Joe Biden will travel to NATO members Poland and Lithuania tomorrow for talks on Ukraine, according to a White House statement. The Pentagon said last week it would send 12 F-16 aircraft to Poland as a sign of U.S. commitment to defend allies in the region; the U.S. previously sent six fighter jets to Lithuania.
EU foreign ministers, who meet tomorrow, are poised to impose asset freezes and visa bans on people and “entities” involved in Russia’s seizure of Crimea, an EU official said.
Obama has signed an executive order authorizing financial sanctions, allowing Treasury Secretary Jacob J. Lew to take steps that could include freezing assets or blocking American companies or individuals from doing business with Russians, Ukrainians or others deemed a threat to Ukraine’s security.