Obama Warns Putin on Ukraine After Deadly Clashes in East

U.S. President Barack Obama and Russian President Vladimir Putin remained at odds over Ukraine as fighting between pro-Russian separatists and government forces highlighted instability in the country’s east.

Obama and Putin discussed the Ukrainian crisis by telephone yesterday without a substantial breakthrough, according to statements from their offices that offered differing stances on the worst confrontation between Russia and the U.S. and its allies since the end of the Cold War.

Tensions intensified over the weekend after deadly clashes between Ukrainian security personnel and separatists who have seized police and government buildings across eastern Ukraine. Even with their differences, the U.S. and Russia plan to proceed with four-party talks in Geneva later this week.

The U.S. blames Putin’s government for instigating trouble in Ukraine’s east and has threatened to impose further sanctions against Russian interests. Russia denies involvement in the unrest, instead blaming authorities in Kiev for ignoring pleas from Russian and Russian-speaking citizens.

Obama “expressed grave concern about Russian government support for the actions of armed, pro-Russian separatists” and urged Putin to use his influence to get them to withdraw from facilities they seized, according to the White House statement.

Putin told Obama that he should “use the American side’s capabilities to prevent the use of force and bloodshed as much as possible,” according to the statement from the Russian president’s office.

Sanctions’ Impact

Sanctions imposed by the U.S. and European Union and the threat of additional measures already have had an impact on Russia. The ruble declined to a three-week low yesterday, and the benchmark Micex stock index retreated 1.3 percent and is down more than 10 percent this year. The Market Vectors Russia ETF, the biggest U.S. exchange-traded fund tracking Russia’s market, slumped 3.2 percent to $22.74.

Obama said during the call that Russia was experiencing “growing political and economic isolation” because of Ukraine and warned of further consequences if the situation isn’t defused, according to the White House. Earlier yesterday, Obama spoke with French President Francois Hollande to discuss the prospect of additional sanctions against Russia.

EU ministers meeting in Luxembourg yesterday decided to put more names on a list of people to be sanctioned, adding to the 51 Russian and Ukrainian political figures blacklisted following Russia’s annexation of Crimea from Ukraine last month.

European Gas

A broader set of economic sanctions against Russia would have an impact on European economies. Germany, Europe’s largest economy had $89 billion in trade with Russia in 2012. By comparison, commerce between Russia and the U.S. amounted to about $38 billion in 2013.

Europe also depends on energy from the east, with gas from Russia accounting for 30 percent and oil for about 35 percent of EU imports in 2011, according to EU data.

The conflict also is hitting Ukraine’s economy. The central bank in Kiev raised the rate to 9.5 percent from 6.5 percent last night, according to a statement on its website, to halt the plunge of the hryvnia, the world’s worst-performing currency this year. Ukraine is facing its third recession since 2008 and dwindling reserves.

While emphasizing U.S. coordination with the EU, the Obama administration hasn’t ruled out unilateral sanctions that would more directly target sectors of the Russian economy, including energy, financial services, metals and mining, engineering and defense.

‘Different Sanctions’

Executive orders signed by Obama “allow for all kinds of different sanctions,” White House press secretary Jay Carney told reporters in Washington, while declining to say whether the latest upheaval in eastern Ukraine would trigger additional penalties. “We’re assessing what they’ve done,” Carney said.

Obama told Putin yesterday the conflict still can be resolved diplomatically, though any talks “cannot succeed in an environment of Russian military intimidation on Ukraine’s borders, armed provocation within Ukraine, and escalatory rhetoric by Kremlin officials,” according to the White House.

Talks among the U.S., Russia, the European Union and Ukraine are scheduled for April 17 in Geneva.

Acting Ukrainian President Oleksandr Turchynov sought to ease tensions by raising the possibility of holding a national referendum on the structure of the state together with presidential elections set for May 25, Interfax reported yesterday. He said he’s sure people will opt for a united, independent Ukraine, according to the news service.

Buildings Occupied

In eastern Ukraine, pro-Russian protesters occupied police and local-government buildings in Horlivka, Kramatorsk, Donetsk and Mariupol, the Ukrainian Interior Ministry said on its website.

At least one Ukrainian serviceman died over the weekend, and armed separatists are occupying police and government buildings in cities across the east. NATO estimates that Russia has massed 40,000 troops in combat readiness on Ukraine’s border. Putin is getting many requests from eastern Ukraine “to intervene in one way or another,” his spokesman, Dmitry Peskov, told reporters yesterday.

Turchynov yesterday accused Russia of sending armed special forces to seize buildings in Ukraine’s east. He told United Nations Secretary-General Ban Ki-moon that Ukraine would welcome UN peacekeepers to help restore order, according to a statement on the parliamentary website.

CIA Chief

Carney, the White House spokesman, confirmed yesterday that CIA Director John Brennan was in Kiev over the weekend. The Obama administration had previously refused to confirm Russian statements that the head of the Central Intelligence Agency had met with officials of Ukraine’s interim government.

Carney characterized it as part of a trip Brennan took to Europe for regular consultations with security officials.

Underlining the tension, two unarmed Russian SU-24 Fencer aircraft flew as many as 12 passes over 90 minutes near the USS Donald Cook in the Black Sea on April 12, Colonel Steve Warren, a Pentagon spokesman, told reporters yesterday.

The destroyer was never in any danger, according to Warren, who called the flights acts “of unprofessionalism” by the Russians. The ship, equipped with the advanced Aegis air-defense system, wasn’t engaging in exercises at the time, he said.

Before it's here, it's on the Bloomberg Terminal.