Aug. 5 (Bloomberg) -- Ukraine expressed alarm about a new buildup of Russian forces on its border as it pursued an offensive against pro-Moscow separatists. Half the residents of the city of Luhansk fled as the fighting got closer.
Russia, which annexed Crimea from Ukraine in March, has deployed 45,000 soldiers, 160 tanks and as many as 1,360 armored vehicles, a Ukrainian military spokesman, Andriy Lysenko, told reporters in Kiev today. There are also 192 Russian warplanes and 137 military helicopters, as well as artillery systems and multiple rocket launchers, he said.
“All this is aimed at keeping the Ukrainian military on its toes,” Timothy Ash, an emerging-markets economist at Standard Bank Group Plc in London, said in an e-mail. “While Russia continues to pursue such maneuvers, the Ukrainian military has to deploy troops along its border to counter the threat of a Russian invasion, and hence diverting scarce troops away from their ongoing offensive.”
With the Ukrainian army advancing on Luhansk and the other rebel stronghold, Donetsk, Russia’s air force began a five-day exercise involving more than 100 planes yesterday. Tensions have been further raised by an incident in which several hundred Ukrainian servicemen crossed the border; more than half have remained in Russia.
Russia’s Finance Ministry canceled a third straight auction of ruble bonds scheduled for tomorrow as borrowing costs rose to the highest levels since March 14. The yield on Russia’s 10-year bonds climbed six basis points to 9.72 percent. It’s increased 109 basis points since July 16, the day before Malaysian Air Flight MH17 came down over rebel-held eastern Ukraine.
Russia’s benchmark Micex stock index fell 1.1 percent at 2:27 p.m. in Moscow. The yield on the Ukrainian government’s dollar-denominated bond maturing in 2017 rose 11 basis points to 9.48 percent, extending an increase over the past three days to 65 basis points.
About half of Luhansk’s 465,000 inhabitants have evacuated the city amid continuing fighting, city council spokesman Oleksandr Savenko told Channel 112 television. The remaining 250,000 people are unable or unwilling to leave, he said.
Luhansk, most of whose residents have been without electricity for more than a week, is “on the verge of a humanitarian catastrophe,” the council said on its website. Some are also without water and fixed-line or mobile phones, it said.
Many of those remaining in Luhansk, which lies close to the Russian border, are retired people or families with children, while only a couple of drugstores are continuing to open and four hospitals and three clinics have been partly destroyed, according to the council.
Donetsk and neighboring Makiyivka are also suffering from water shortages, while another nine towns in the region have no mains water at all, the Donetsk city council said on its website today. Repairs can’t be made because of the fighting. About 50 multistory buildings in the city are without power.
Eight separatists were wounded by an explosion in central Donetsk late last night, while gun and mortar fire continued through the night, the council said.
Three Ukrainian soldiers were killed and 46 wounded in the past 24 hours, in which 26 clashes were reported between government troops and rebels, Lysenko said. He said Russian drones and helicopters had continued to violate Ukrainian airspace.
The separatist forces, which now number about 15,000, up from 300 when the conflict started, hold less than half the territory they did four weeks ago, Ukrainian Defense Minister Valeriy Geletey said in a BBC interview broadcast two days ago. More than 65 towns and villages in the Donetsk and Luhansk regions of eastern Ukraine have been retaken, he said.
“We are deeply concerned by Russia’s plan to conduct a large military aviation exercise this week in areas bordering Ukraine,” U.S. State Department spokeswoman Jen Psaki told reporters in Washington yesterday. “Exercises of this kind are provocative and only serve to escalate tensions. Russia has repeatedly called for a peaceful solution to the situation in Ukraine and must match its words with deeds by ceasing the flow of weapons, fighters, and money into Ukraine, and by moving its military forces away from the Ukrainian border.”
Ukraine’s armed forces are pressing ahead with their offensive after the U.S. and the European Union increased pressure on Russian President Vladimir Putin over his backing for the rebels with an expansion of sanctions. The downing of Flight MH17, which the U.S. says was probably caused by a missile fired by the insurgents, has helped harden attitudes against Russia. The rebels and Putin’s government blame Ukrainian forces.
Ukraine’s Defense Ministry accused rebel forces of opening fire on a group of almost 200 servicemen who returned from Russia today after crossing the border. The insurgents must have been aware of the timing and route of the repatriation, the ministry said on its Facebook page.
Of a total of 438 Ukrainian servicemen who crossed the frontier, 195 asked to return home, Vasily Mayaev, a spokesman for the FSB security service, told reporters yesterday in Rostov, southern Russia. The remaining soldiers may apply for Russian citizenship at their own discretion, he said. Ukraine said the troops, who were fighting near the border, had no option but to cross over after they were shelled from Russian territory.
More than 1,000 people have died in the fighting so far. While Russia has repeatedly denied any involvement in the conflict, the U.S. and its EU allies blame Putin for failing to rein in the insurgency and stop the war.
Russia is ready for “any format” of talks with the EU, the U.S. and Ukraine, Russian Foreign Minister Sergei Lavrov said yesterday in an interview with the Itar-Tass news service.