Ukraine Tensions Flare as Poroshenko Reports Attack

Tensions flared in Ukraine yesterday as the government said its army destroyed part of a column of military vehicles that crossed the border from Russia, even as Vladimir Putin denies any military presence.

President Petro Poroshenko said Ukrainian forces destroyed part of a column that had arrived from Russia. The Foreign Ministry in Moscow rejected the statement and warned about a potential attack on another convoy that carries aid. Ukraine’s top diplomat, Pavlo Klimkin, said he will meet with his Russian, German and French counterparts tomorrow in Berlin.

The incident adds to the building unease over Russia’s plan to send about 275 trucks with what it says is humanitarian aid to rebel-held areas in eastern Ukraine. Even with Ukraine saying it doesn’t see the armed vehicles as the sign of potential invasion, their arrival raised the stakes, said Volodymyr Fesenko, of the Penta research institute in Kiev.

“It was a gut check to see if Ukraine will defend itself,” said Fesenko, the head of the political think tank. If Russia “reacts in any way, that would mean that they confirm this convoy was a Russian one, and thus that Russia made a military intervention into Ukrainian territory. But I do not think it will.”

‘Information War’

No military column from Russia entered Ukraine, said Major General Igor Konashenkov, a spokesman for the Russian Defense Ministry, according to state-run news service RIA Novosti. Ukraine’s comments are based on “fantasies” and shouldn’t be the “subject of serious discussion,” he was cited as saying.

Ukraine’s statements on the armed convoy amount to “provocation” and are part of an “information war,” Maria Zakharova, a spokeswoman for the Russian Foreign Ministry, said by phone. The government in Kiev is seeking to aggravate the conflict and drag Russia into it, she said.

Global stocks fell and Treasuries extended gains as escalating tensions in Ukraine outweighed optimism on central bank stimulus. Gold trimmed losses and the yen rose amid increased demand for haven assets.

The MSCI All-Country World Index fell less than 0.1 percent in New York, reversing an earlier rally of 0.5 percent while paring a drop of as much as 0.4 percent. The Standard & Poor’s 500 Index closed little changed. The yield on 10-year Treasuries slid 6 basis points to 2.34 percent. Gold for immediate delivery fell 0.7 percent, paring an earlier drop.

Artillery Fire

The government in Kiev has for months said that separatist rebels in its easternmost regions are receiving support from Russia, including artillery fire. Ukrainian troops were shelled from across the border again, Andriy Lysenko, a spokesman for the military, told reporters in Kiev yesterday.

The conflict is coming to a head as Ukrainian government forces push to dislodge pro-Russian insurgents from their strongholds of Luhansk and Donetsk.

NATO Secretary General Anders Fogh Rasmussen told reporters in Copenhagen yesterday that Russia made an “incursion” into Ukraine and that the military alliance sees a continuous flow of Russian weapons into the country.

European Union governments warned Putin that they’re ready to expand sanctions if the conflict intensifies. Citing a “worsening crisis in eastern Ukraine and its humanitarian impact on the civilian population,” EU foreign ministers urged Russia in a joint statement yesterday to stop “any form of border hostilities,” including arming pro-Russian separatists, and to pull back its forces from the border.

‘Slight Detente’

“A quick resolution of the crisis remains unlikely,” Otilia Dhand, an analyst at Teneo Intelligence in London, who specializes in eastern Europe, said by e-mail. “The new round of talks in Berlin might at best bring a slight detente and potentially avert a further escalation over the next days.”

Putin, under increasing international pressure for allegedly supporting the separatists, pledged during a visit to Crimea this week that he would work to halt the conflict.

About 275 trucks were parked in a field close to the Russian town of Kamensk-Shakhtinsky. Ukraine sent dozens of officials to join Red Cross representatives in inspecting the cargo on the Russian side of the border.

Russian Defense Minister Sergei Shoigu told his U.S. counterpart, Chuck Hagel, in a phone call “that there were no Russian military personnel involved in the humanitarian convoy, nor was the convoy to be used as a pretext to further intervene in Ukraine,” according to a Pentagon statement.

The U.S. is gathering information on reports that Ukrainian forces disabled vehicles in a Russian convoy that crossed the border, Caitlin Hayden, spokeswoman for the National Security Council spokeswoman, said in e-mailed statement.

Red Cross

The International Committee of the Red Cross said it’s deploying additional staff to Russia and Ukraine in preparation for aid delivery. Both sides asked the organization to assist.

“We still need assurances from all parties to the conflict staff will be allowed to perform tasks safely, with due respect for humanitarian principles,” Laurent Corbaz, the Red Cross’s head of operations for Europe, said in an e-mailed statement. “Given complex logistics, security challenges involved, this aid operation will take some time, we call on authorities of both countries to do all they can to resolve outstanding issues quickly.”

An aid shipment sent by the Ukrainian government was handed to the Red Cross, said Iryna Herashchenko, Poroshenko’s envoy to eastern Ukraine.

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