April 18 (Bloomberg) -- The U.S. and its European allies demanded Russia help calm the Ukraine crisis or face new sanctions after four-nation talks produced an accord aimed at lowering tensions in their worst standoff since the Cold War.
Top diplomats from Ukraine, the U.S., the European Union, and Russia called for illegal groups in Ukraine to disarm, return seized buildings to their owners and free occupied public places. In line with the pact, the government in Kiev prepared an amnesty law for pro-Russian protesters while also voicing skepticism that the agreement will solve the crisis.
“Ukraine does not have any extraordinary expectations,” Ukrainian Prime Minister Arseniy Yatsenyuk said in Kiev today.
U.S. and EU officials expressed readiness to deepen sanctions against Russia, which they say has massed 40,000 troops on Ukraine’s border and is fomenting unrest after its annexation of Crimea last month. President Vladimir Putin has said his government isn’t responsible for home-grown dissatisfaction among Russian-speaking residents of eastern Ukraine while maintaining he has the right to send in troops.
Along with a call for amnesty for pro-Russian activists, the officials agreed that a mission from the Organization for Security and Cooperation in Europe will help oversee events in eastern Ukraine and a new constitutional process will aim to establish “a broad national dialogue” in the former Soviet republic of 45 million people.
The deal may calm the situation even as risks -- including the difficulty of disarming both pro-Russian activists in eastern Ukraine and nationalist paramilitary organizations in the country’s west -- are “likely to scupper the agreement,” analysts from New York-based Eurasia Group including Alex Brideau and Mujtaba Rahman wrote in a note today.
“Any fresh U.S. sanctions are now unlikely at least until next week, and the possibility of expanded EU sanctions is now more remote,” they wrote, adding that Putin questioned the inclusion of Russian-speaking regions in Ukraine in televised speech that coincided with yesterday’s talks.
“His recent surge in domestic popularity depends on his ability to make good on an expansive and pugnacious conception of Russia’s national interests in Ukraine,” they wrote.
Putin yesterday rejected as “nonsense” accusations from the U.S. and Ukraine that he’d already deployed forces in the east of the country and said that Russia had taken over Ukraine’s Black Sea peninsula of Crimea last month because Russian speakers there were facing “real threats.”
“We definitely know that we should do everything to help these people defend their rights and define their destiny,” Putin said in a televised question-and-answer session in Moscow. “We will fight for this. The Federation Council gave the president the right to use military force in Ukraine. I hope very much that I don’t have to use this right.”
Russia’s Micex index of equities advanced for a third day, while the ruble jumped the most among 31 global currencies tracked by Bloomberg and Ukraine’s hryvnia posted the longest rally since August. U.S. stocks rose and Treasuries fell, pushing 10-year note yields up the most in a month.
U.S. President Barack Obama said he remained skeptical about yesterday’s agreement producing concrete results.
“I don’t think we can be sure of anything at this point,” Obama said at a White House news conference. “We’re not going to know whether, in fact, there’s follow-through on these statements for several days.”
Obama held out the prospect of sanctions against Putin’s government that he said would be crippling, although he added: “We have no desire to see further deterioration of the Russian economy.”
Officials from the Treasury Department and the National Security Council told mutual-fund and hedge-fund managers last week in Washington that they were planning additional sanctions against Russia over the conflict in Ukraine, according to a person who attended and asked not to be identified because the discussions weren’t public.
“If we’re not able to see progress on the immediate efforts, to be able to implement the principles of this agreement this weekend, then we will have no choice but to impose further costs on Russia,” U.S. Secretary of State John Kerry said in Geneva yesterday.
It’s now “necessary to prove that the Geneva agreements will change politics rather than just remain on paper,” German Foreign Minister Frank-Walter Steinmeier said in a statement late yesterday.
U.K. Prime Minister David Cameron and EU President Herman Van Rompuy agreed in a phone conversation that the EU “should continue preparatory work on potential additional sanctions” so “the EU was ready if the agreement was not implemented and the situation on the ground in Ukraine deteriorated,” according to an e-mailed statement from Cameron’s office.
The Russian campaign in eastern Ukraine has been almost entirely covert, a mixture of infiltrating special operations forces, arming protesters, spreading propaganda and bribing local officials for support, said two U.S. officials who requested anonymity to discuss internal policy deliberations.
U.S. Air Force General Philip Breedlove, the commander of NATO forces, wrote in a blog post yesterday that “what is happening in eastern Ukraine is a military operation that is well-planned and organized and we assess that it is being carried out at the direction of Russia.”
“The pro-Russian ‘activists’ in eastern Ukraine exhibit tell-tale military training and equipment and work together in a way that is consistent with troops who are part of a long-standing unit, not spontaneously stood up from a local militia,” he wrote.
The Geneva agreement was announced after talks among Kerry, Russian Foreign Minister Sergei Lavrov and their counterparts, Andriy Deshchytsia of Ukraine and Catherine Ashton, the European Union’s foreign-policy chief.
Deshchytsia told reporters that “the next couple of days will be crucial” and “will be a test for Russia if Russia wants to really show it’s willing to have stability.”