EU Stands by Sanctions on Russia After Ukraine Truce Sealed

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Russia-Ukraine Cease-Fire: What Did Putin Agree To?

European leaders said Russia will have to wait for relief from economic sanctions, reflecting concern that Thursday’s cease-fire agreement will only mark a pause in the war that has devastated eastern Ukraine.

The accord was struck after more than 18 hours of non-stop talks between Ukrainian President Petro Poroshenko, his Russian counterpart Vladimir Putin, German Chancellor Angela Merkel and French leader Francois Hollande. It envisages a truce from midnight at the start of Feb. 15 and reaffirms some commitments from a failed September bid to end the conflict that has devastated eastern Ukraine.

The collapse of previous cease-fires has stoked doubts as to whether this one will hold. Ten months of fighting have killed more than 5,000 people, crushed Ukraine’s economy and propelled Russia toward a recession through U.S. and European sanctions. European Union sanctions -- whether to ease or stiffen them -- remained off the agenda for a summit in Brussels, with the bloc awaiting proof the truce is holding.

“What we’ve reached now gives us more hope than if we hadn’t agreed on anything,” Merkel told reporters in the Belarusian capital of Minsk. “We don’t have any illusions that a lot of work is still required but there’s a real chance for things to take a turn for the better.”

Raising pressure to deliver a settlement, the run-up to the summit was accompanied by escalating violence and calls for the U.S. to supply weapons to Ukraine’s struggling army.

The U.S. doesn’t rule out imposing tougher sanctions or giving more security assistance to Ukraine if the Minsk deal isn’t fully implemented, according to American officials who briefed reporters on condition they weren’t identified.

Mixed Reaction

Investors’ reaction to the cease-fire was mixed as concerns about the permanence of the cease-fire were alleviated by optimism that further Russian sanctions are off the table for now. While the Micex Index of stocks advanced 2.2 percent in Moscow, the ruble weakened 0.1 percent against the dollar.

In Ukraine, strains on the government’s coffers was eased after the International Monetary Fund announced a $40 billion bailout to help Ukraine stave off a default. Benchmark dollar debt due in July 2017 rose to 56.9 cents on the dollar. It’s down from about 90 cents a year ago, before Russia’s annexation of Crimea.

Highlighting the tensions still gripping eastern Ukraine, military spokesman Andriy Lysenko told a briefing in Kiev that 50 tanks crossed the border from Russia overnight along with 40 rocket launchers and 40 armored personnel carriers. Two Ukrainian servicemen were killed in the past day, the army said.

Putin was more upbeat, telling reporters that “this is a good morning” as he emerged from the marathon session to announce the results.

‘Genuine Process’

“Despite all the difficulties of the negotiating process, we managed to agree on the main things,” he told reporters. “I call on both sides in the conflict to stop the bloodshed as quickly as possible and move to a genuine process of long-term political settlement.”

Poroshenko said control of Ukraine’s border with Russia would revert back to his government by year-end, contingent on a constitutional overhaul. While he also pledged to give the breakaway Donetsk and Luhansk regions more power, he rejected autonomy for them and refused to switch to a federal system of governance.

“It wasn’t easy -- we were presented with various unacceptable conditions,” Poroshenko said. “We rebuffed all ultimatums.”

Other commitments in Thursday’s accord included a removal of heavy weapons to start not later than the second day after the truce and end within two weeks, to be overseen by the Organization for Security and Cooperation in Europe.

Buffer Zone

An initial 50-kilometer (30-mile) buffer zone will also be established between the two sides, while there will be an amnesty covering all prisoners, including Ukrainian pilot Nadiya Savchenko, who’s being held in Russia.

Asked about potential weaknesses in the accord, the U.S. officials cited the delay in Ukrainian government forces regaining control over the border with Russia, and said that continued transfers of military aid across the frontier would be a violation of the agreement.

Thursday’s document was signed by representatives of the so-called trilateral contact group of Ukraine, Russia and the OSCE, rather than the leaders who attended the summit.

There’s the still a risk the fighting will flare up in the future, even if the cease-fire takes hold, according to Joerg Forbrig, a senior program director at the German Marshall Fund in Berlin.

“Whether east Ukraine stays a frozen conflict or heats up again will depend on whether Russia and the rebels want further territory,” he said by phone. “That’s still an open question.”

EU Sanctions

EU decision-making procedures may work in the Russian president’s favor, since economic restrictions such as curbs on the financing of Russian banks will expire in July unless all 28 EU governments vote to renew them.

For now, even avowed critics of the sanctions policy said they want to hear first from Merkel and Hollande.

The deal “is no guarantee but a glimmer of light,” said Austrian Chancellor Werner Faymann. Another sanctions critic, new Greek Prime Minister Alexis Tsipras, said Greece’s economic problems will be his focus.

After trumpeting a diplomatic breakthrough in Minsk, France’s Hollande sounded a more cautious note on arrival in Brussels. He offered no “guarantee” that the cease-fire set for Feb. 15 will hold, saying: “We have to continue to remain vigilant, to exercise pressure.”

Similar sentiments came from EU President Donald Tusk, who as Polish prime minister last year was one of the architects of the sanctions policy. “The real test is the respect of the cease-fire on the ground,” Tusk said on his way into the summit.