Putin Moves to Ease Tensions After Ukraine Warns of Invasion

Russia-Ukraine Tensions Spill Over Into Markets
  • Russian president holds Security Council meeting in Crimea
  • Ruble, hryvnia weaken amid concerns over renewed conflict

Vladimir Putin sought to ease tensions after Ukraine warned of a possible “full-scale” invasion by Russia, even as he convened a meeting in Crimea to demand heightened security measures on the peninsula he annexed in 2014.

It’s “obvious” that Ukraine carried out an attack in Crimea because it “doesn’t want to, or can’t for whatever reason, fulfill” a 2015 cease-fire agreement to resolve the conflict with separatists in the country’s east, Putin said at the meeting of the Russian Security Council in the port city of Sevastopol Friday.

Ukraine had acted provocatively, though he hoped “that it won’t be the final choice of our partners, that common sense will prevail,” the Russian president said. “We are not going to restrict our relations, despite the reluctance of the current authorities in Kiev to have full-fledged diplomatic relations.”

The Russian leader’s language contrasted strongly with his accusations last week that Ukraine was guilty of “terror” tactics and would face “very serious” measures for killing two servicemen in Crimea earlier this month. Ukraine said the incident never happened. Ukrainian President Petro Poroshenko, whose government blames Russia for the separatist war, put his military on high alert.

Putin, who’s making his first visit to Crimea since March, plans to speak with officials in the territory and visit a children’s summer camp, according to the Kremlin press service. Russia seized Crimea from Ukraine, sparking the deepest crisis since the Cold War in relations with the U.S. and the European Union.

Putin’s remarks follow the worst diplomatic flareup in already testy relations between Russia and its neighbor since a 2015 truce agreement signed in Minsk, Belarus, eased violence between the rebels and government forces in eastern Ukraine. Poroshenko said on Thursday that the chance of an escalation was “very significant” and “we don’t rule out a full-scale Russian invasion” of his country of more than 40 million people.

Russia’s ruble fell 0.4 percent against the dollar to 63.8613 at 4:10 p.m. on Friday in Moscow. Ukraine’s hryvnia was 0.2 percent weaker, and the yield on its dollar-denominated bond maturing in 2019 rose 15 basis points to 8.513 percent.

The spike in tension comes less than a week before Ukraine’s anniversary of its independence from the Soviet Union and a month before Russia holds parliamentary elections. Following several weeks of intensifying clashes between Ukrainian troops and separatists, the dispute also complicates Ukraine’s efforts to focus on domestic policies needed to restart a stalled $17.5 billion western-led economic bailout.

After his arrival in Crimea, Putin approved staff changes that included replacing Russian Education Minister Dmitry Livanov so that he can take over the task of rebuilding economic ties with Ukraine.

“His personal business qualifications will help rebuild economic ties with our neighboring state, which is important to us,” Putin said.

Heavy Weapons

The number of heavy weapons near the front line in eastern Ukraine has almost doubled in the past week, Alexander Hug, deputy mission chief for the Organization for Security and Cooperation in Europe, said in Kiev Friday. Multiple-launch rocket systems were used against government-controlled areas near the rebel-held city of Donetsk, he said, adding that rebels were blocking monitoring teams and shooting at OSCE observation drones.

As efforts to bring peace to eastern Ukraine stall, Putin said plans to resume talks over the cease-fire pact at next month’s Group of 20 summit in China would be pointless. The Russian leader, whose economy is still battling a recession, may be trying to gain the upper hand when discussions over Ukraine’s future resume.

“This escalation may be linked with the Kremlin’s desire to exit the current format of talks,” Serhiy Zgurets, head of the Defense Express military research center in Kiev, said by phone. “It wants to return to direct negotiations with the U.S. to divide spheres of interest.”

‘Save Face’

Putin doesn’t want a war and both Russia and Ukraine are escalating their rhetoric to try to push the West to be more active in resolving the conflict, Igor Bunin, director of the Moscow-based Center for Political Technologies, said by phone.

“Ukraine wants more help and Putin wants to leave Donbas but to save face,” Bunin said, referring to the area comprising the war-ravaged districts of Donetsk and Luhansk in eastern Ukraine.

The U.S. and the EU imposed sanctions against Russia after it annexed Crimea and the conflict in Ukraine’s east erupted. German Chancellor Angela Merkel said that she saw no reason to lift the penalties because the conditions for doing so hadn’t been met, according to an interview with Redaktions Netzwerk Deutschland published Friday. Implementing the Minsk agreement “is and remains the yardstick for the future of sanctions,” she said.

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