Ukraine Vessels Attacked as EU Readies Russia Sanctions

Pro-Russian rebels attacked two Ukrainian coastal guard vessels for the first time, just hours after European Union governments agreed to impose new sanctions on Russia if the conflict worsens.

Fighting in southeast Ukraine continued and the situation there remains “tense,” according to military officials in Kiev. While EU leaders disagreed about possible military assistance to Ukraine, they gave the European Commission a week to deliver proposals for the penalties that may target Russia’s energy and finance industries.

Russian President Vladimir Putin said talks on the “statehood” status of southeast Ukraine are needed to resolve the crisis, according to a Channel One TV interview taped ahead of the EU summit and aired today. His spokesman Dmitry Peskov later told reporters in Chelyabinsk, Russia, that Putin isn’t seeking “statehood” for the region.

“We must strive toward implementing the plan we agreed upon,” Putin said. “We must immediately commence substantive talks and not only on technical issues, but also on the political organization of society and the statehood status of southeast Ukraine in order to serve the interests of people living there.”

Putin’s statehood statement isn’t surprising and is “in line with Moscow’s plans of creating an autonomous region in eastern Ukraine that potentially will have a right to self-determination, which could then be a leverage on Ukraine, particularly in preventing the country from joining NATO,” Lilit Gevorgyan, senior analyst at IHS Global Insight in London, said by e-mail.

Peaceful Solution

Although Putin said he has an agreement with Ukrainian President Petro Poroshenko on a peaceful solution for the conflict, it’s impossible to predict when the crisis will end as the situation in Ukraine is complicated by the political campaign ahead of Oct. 26 parliamentary elections, he said in the TV interview.

Those who expect Ukrainian rebels to sit and wait for talks while the area is torn by fighting are captives of their illusions, Putin said.

Pro-Russian rebels attacked the two Ukrainian coast guard cutters while they were patrolling the Sea of Azov near Novoazovsk, Ukraine’s military said today without elaborating. At least one of the ships was on fire, Mariupol, Ukraine-based news website reported. Six border troops from the vessels were injured and taken to hospitals in Mariupol, a port city,, the news service of Ukraine’s 1+1 television channel reported.

Thousands Killed

German Chancellor Angela Merkel said she opposes sending arms to Ukraine because it would be a signal the conflict has a military solution. Almost 2,600 people have been killed so far, the United Nations said.

“The situation has very much escalated over the last two days and if this continues we will decide on further sanctions within the week,” Merkel told reporters in Brussels.

The U.S. welcomed the EU’s decision to prepare more sanctions against Russia and is working closely with the bloc and other partners to “hold Russia accountable for its illegal actions in Ukraine, including through additional economic sanctions,” Caitlin Hayden, a spokeswoman for the White House National Security Council, said in a statement today.

The administration called on Russia “to immediately” remove its military from Ukraine and end supporting the separatists, according to the statement. Russia denies that it’s involved in the fighting in the neighboring country.

‘No Return’

Poroshenko told reporters at the EU summit in Brussels that “we are close to the point of no return.”

The EU and the U.S. have already slapped visa bans and asset freezes on Russian individuals and companies, and since July have imposed steadily tougher sanctions targeting the country’s energy, finance and defense industries.

Poroshenko called for military and technical assistance for Ukraine from the EU. He said there will be a trilateral contact group meeting tomorrow with the Organization for Security and Cooperation in Europe, Ukrainian ex-President Leonid Kuchma and Russian ambassador Mikhail Zurabov.

Talks will focus on Ukrainian “hostages” held in Russia, the OSCE monitoring mission, and a potential cease-fire, he said.

“I cross my fingers, I hope it will be a cease-fire,” Poroshenko said, adding that he expects to publish a draft peace plan next week.

Russia and Ukraine exchanged captured servicemen, Andriy Lysenko, the spokesman for Ukraine’s military, said today.

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