Ukraine Nears End of Truce as EU Set to Discuss Crisis

A cease-fire called by Ukraine’s government in its fight against rebels in the east expires today, as European Union leaders prepare to sign a pact tying Ukraine closer to the bloc with President Petro Poroshenko.

The week-long truce, which the authorities in Kiev say has been repeatedly flouted by the pro-Russian separatists, is scheduled to run out at 10 p.m. local time. As they sit down with Poroshenko in Brussels, European Union heads of government will also discuss possible new sanctions against Russia.

Progress in Ukraine “hasn’t been as apparent as I would have wished, considering the seven-day cease-fire,” German Chancellor Angela Merkel told reporters in Kortrijk, Belgium, yesterday before the summit started. The bloc’s leaders “will discuss how much further we want to go with sanctions,” depending on what they hear from the Ukrainian president.

With momentum behind peace efforts flagging, the U.S. is preparing sanctions against Russia on technology aimed at exploiting and producing oil and gas products, a major part of that country’s economy, according to three people briefed on the plans. EU countries have been preparing possible deeper penalties since March, accusing Russia of backing the separatists in the Donetsk and Luhansk regions.

Situation Volatile

Russia’s Micex stock index rose 0.1 percent at 8:27 a.m. in Moscow after a two-day slide, while the ruble rose 0.4 percent against its euro-dollar basket. Ukraine’s hryvnia was unchanged at 11.89 against the dollar. It’s lost 31 percent against the dollar since the start of the year, the worst performance among global currencies tracked by Bloomberg.

Ukraine Economy Minister Pavlo Sheremeta said yesterday the conflict may drag on even as peace talks continue. “We are not too optimistic,” he told a conference in Kiev. “Developments are moving in the right direction, but the situation is quite volatile.”

Though the truce has been backed by Russian President Vladimir Putin and separatist leaders, rebels fired at checkpoints set up by government forces 13 times in 24 hours, Ukraine’s Foreign Ministry said in a statement yesterday afternoon. The militants also used mortars in an attack on Kramatorsk airport in the north of the Donetsk region, the ministry said, accusing them of using the truce to “relocate, reinforce their check-points and repair military vehicles.”

Captain Abducted

Five Ukrainian national guardsmen were wounded in an attack on their headquarters in Donetsk and rebels took their captain prisoner, the National Guard said on its website.

Russia has protested that the deal with the EU that Poroshenko will sign in Brussels will damage its own economy. Its rejection late last year by his pro-Moscow predecessor, Viktor Yanukovych, led to protests in Kiev that triggered the Ukraine crisis.

Four monitors for the Organization for Security and Co-operation in Europe who were abducted in Donetsk region in May were released yesterday after 32 days in captivity, the organization said on its website. A second team seized in Luhansk hasn’t been captured, the OSCE said.

Separatists are holding more than 200 hostages, including foreigners, and have killed 145 Ukrainian servicemen and wounded about 300 since the fighting started, the Interfax news service cited Poroshenko’s representative on eastern issues, Iryna Herashchenko, as saying yesterday. She said about 30,000 Ukrainians had fled the Crimean peninsula in the Black Sea after its annexation by Russia in March.

Preparing Sanctions

In draft conclusions before the summit, the EU echoed comments from U.S. Secretary of State John Kerry calling for the halt of weapons from Russia into eastern Ukraine, including armored vehicles and anti-aircraft weapons.

The European Commission and “the member states have been undertaking preparatory work on possible targeted measures, as it requested in March, so that further steps can be taken should events in eastern Ukraine so require,” according to the draft seen by Bloomberg.

The U.S. and the EU have agreed that sanctions have to be ready, Kerry said yesterday after meeting French Foreign Minister Laurent Fabius.

“But our preference is not to have to be in a sanctions mode,” he said in Paris. “We would like to see a cooperative effort between the United States, Europe and Russia and the Ukrainians. And we are going to try to encourage that as much as we can.”

Russian Industries

The U.S. will hold off on measures targeting Russian industries, according to 83 percent of respondents in a Bloomberg survey of 23 economists, compared with 66 percent last month. The EU will refrain from sanctions according to a record 96 percent, up from 84 percent in May. The survey was conducted June 20-25.

The attacks and the expiration of the truce will probably lead to a renewed push by government forces against the separatists, Oleksiy Haran, a professor of comparative politics at the Kyiv-Mohyla Academy, said by phone yesterday.

“Unless combat activity stops from the other side, Ukraine will have to continue,” he said. “We expect that the West will demand not words but actions from Russia. So far there were only words. But the border is still open, Russia continues to help” the separatists, he said.

Amid the unrest, Putin’s popularity among Russians continued to rise to near its 2008 peak this month, Moscow-based polling company Levada Center said in a statement yesterday. The Russian leader’s approval rating is 86 percent, up from 65 percent in January and compared with a highest-ever 88 percent. The number of those who disapprove of Putin’s actions in Ukraine fell to 13 percent from 16 percent, according to the June 20-23 poll of 1,600 people with a 3.4 percentage-point margin of error.

(An earlier version of this story corrected the time of the cease-fire.)

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