U.S. Says Russia Is Stoking Ukraine Conflict Before Talks

The U.S. urged its European allies to support deeper sanctions against Russia and accused its former Cold War foe of sending heavy weapons and other support to separatists as peace talks struggled to inch forward.

President Barack Obama’s administration pressed European Union ambassadors at a meeting yesterday to halt what American officials called Russian President Vladimir Putin’s destabilizing actions, according to three participants. The U.S. may sanction Russia’s financial and defense industries -- with or without its European allies -- and measures could be imposed as soon as this week, U.S. officials said on condition of anonymity.

“While Russia says it seeks peace, its actions do not match its rhetoric,” the U.S. government said in a statement. “We have no evidence that Russia’s support for the separatists has ceased. In fact, we assess that Russia continues to provide them with heavy weapons, other military equipment and financing and continues to allow militants to enter Ukraine freely.”

Ukrainian forces are trying to encircle and wipe out insurgents who retreated to the mainly Russian-speaking cities of Luhansk and Donetsk and to shore up its 2,000 kilometer (1,200 mile) eastern border. Tensions escalated this week after Ukraine’s government said Russian forces may have shot down one of its military airplanes, while its neighbor blamed Ukrainian forces for shelling that killed one person in Russia.

Chancellor Merkel

Speaking to reporters during a visit to the Croatian city of Dubrovnik, German Chancellor Angela Merkel said the question of possibly expanded sanctions against Russia is on the agenda for an EU summit tomorrow in Brussels.

“We haven’t spoken with every member state,” she said, adding she did not want to “pre-empt the results today.”

In Warsaw, Polish Foreign Minister Radoslaw Sikorski said the “unprecented” fighting in east Ukraine, including use of tanks and other heavy military equipment, “is a test of credibility for EU” ahead of the bloc’s summit.

Russia’s Micex Index fell 0.4 percent to 1,477.58 at 6:37 p.m. in Moscow. The hryvnia strengthened less than 0.1 percent to 11.71 per dollar in Kiev.

Video Call

Officials from Ukraine, Russia and the Organization for Security and Cooperation in Europe agreed to hold a video call today with rebel representatives that should pave the way for face-to-face talks, Germany’s government said yesterday.

Still, the U.S. State Department tried to ratchet up pressure. In a statement, it said many of the self-proclaimed leaders of the separatists “hail from Russia and have ties to the Russian government.” It also said it was “confident” Russia was mobilizing tanks, anti-aircraft systems, rocket launchers and other armored vehicles to a site in southwest Russia to help the separatists.

“We are concerned much of this equipment will be transferred to separatists,” the State Department said. “We are confident Russia has already delivered tanks and multiple rocket launchers to them from this site.”

Plane Downed

It said Russia was moving forces back to its border with Ukraine and that it had allowed officials from the self-proclaimed Donetsk People’s Republic to establish a recruiting office in Moscow. Separatists are still holding as many as 150 mostly civilian hostages in Ukraine, including teachers and journalists, according to the statement.

An An-26 transport plane was shot down in eastern Ukraine yesterday by a “powerful weapon” not previously used by the separatists, probably from inside Russia, Defense Minister Valeriy Geletey told President Petro Poroshenko, according to the president’s website.

It was probably struck either by an air-to-air missile from a jet based at Russia’s Millerovo base or a surface-to-air rocket from a mobile system, Andriy Lysenko, a Defense Ministry spokesman, said in Kiev yesterday. The government has “undisputed proof” that Russia was involved, Interfax reported, citing the head of Ukraine’s intelligence service, Valentyn Nalyvaychenko.

Ukrainian forces are still searching for six people from the aircraft, while two have been captured by pro-Russian rebels, Lysenko said. Igor Konashenkov, a spokesman for Russia’s Defense Ministry, couldn’t be reached for comment on his mobile phone.

‘Wide-Scale Aggression’

“Ukraine, as never before, is on the brink of wide-scale aggression from our neighbor,” Mykhaylo Koval, deputy head of the National Defense and Security Council, said last night.

Separatists fired on a residential area in Luhansk yesterday evening, destroying a cafe, a market and private houses, the Interior Ministry in Kiev said in a statement. The city announced a three-day morning period after 17 civilians died, including at least one child, and 73 were wounded during the past three days, the mayor’s office said.

Four more people were killed and four were wounded in Snezhnoe, Donetsk region, the local administration said in a statement. The village was attacked by an unidentified plane that was not from the Ukrainian military, which has not used its aircraft since the An-26 was shot down, Interfax reported today, citing Lysenko. Six Ukrainian soldiers also died and 13 were wounded in the last 24 hours, IFX reported.

Anti-Russian ‘Hysteria’

Poroshenko spoke with Chancellor Merkel at around midnight and agreed OSCE monitors would be placed at two border checkpoints and drones may be used to observe the frontier, his office said in a statement.

OSCE Chairperson-in-Office Didier Burkhalter also phoned with Ukrainian Foreign Minister Pavlo Klimkin and Russian Foreign Minister Sergei Lavrov, stressing the importance and urgency of talks with leaders of “illegally armed groups in the eastern region of Ukraine” to prepare the ground for cease-fire efforts, the OSCE said in a statement on its website.

Russia said some OSCE delegations weren’t being constructive and that the U.K. was pushing anti-Russian “hysteria” in the organization. The Defense Ministry in Moscow invited military attaches from 18 countries, including the U.S. and Germany, to see the Russian-Ukrainian border in Rostov region, RIA Novosti reported, citing Deputy Defense Minister Anatoly Antonov.

EU Disunity

The EU has imposed asset freezes and visa bans on 72 people and two companies connected with the destabilization of Ukraine and Russia’s annexation of Crimea in March, measures that advocates of stricter sanctions say are symbolic gestures.

The EU’s first opportunity to consider wider penalties will be at a summit tomorrow. Objections by countries such as Italy, Austria, Slovakia, France and Greece have frustrated moves toward broader sanctions, which require unanimity.

Lysenko dismissed Russian claims that Ukraine’s military fired the artillery round that killed one person in the Russian region of Rostov last week. Ukraine also has proof that its border guards were attacked from Russian territory and that Russian helicopters and drones crossed over the border, he said.

“Pro-Russian militants used mortar fire and killed one Russian citizen,” Lysenko said. “Now Russia is trying to present the shooting as an attack from the Ukrainian army. Those accusations are groundless.”

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