Ukrainian Truce Frays as Rebels Step Up Airport Attacks

Ukraine’s military fought off a separatist assault on the Donetsk airport as shelling killed 10 civilians in the eastern city, destabilizing a cease-fire that curtailed violence and casualties for most of September.

Government forces still hold the airport of the biggest city in the combat zone after repelling a one-hour attack, the army said on Facebook yesterday. The shelling that killed the civilians and wounded at least nine more including a round that exploded meters from a school where 70 children were in class, the Donetsk regional council said on its website.

“The situation in the area remains difficult,” Ukrainian military spokesman Andriy Lysenko said yesterday. Rebels “continue to violate the-cease fire and shell Ukrainian positions.”

With elections approaching on Oct. 26, an upsurge in violence since late last month contradicts comments by President Petro Poroshenko last week that the worst of the conflict is over. While U.S. Ambassador to Ukraine Geoffrey Pyatt said on Twitter Russian forces and military equipment are still in the country and the border remains unsecured, Vladimir Putin’s government denies any involvement.

Difficult Policing

Joint monitoring groups including Ukrainian and Russian soldiers and representatives from the Organization for Security and Cooperation in Europe began patrols yesterday to monitor whether the cease-fire reached in Minsk, Belarus on Sept. 5 was being observed, Lysenko said.

The two sides have agreed to establish a 30 kilometer (19 mile) buffer zone between government forces and the rebels and exchange prisoners. Ukraine is preparing to receive its first drones to oversee the truce area, he said, even as the number of informal units and long-distance artillery bombardments from both sides may complicate the mission.

“The cease-fire in Ukraine offers an opportunity, but Russia maintains its ability to destabilize Ukraine and Russia remains in breach of international law,” NATO’s new secretary general, Jens Stoltenberg, told reporters in Brussels on his first day as head of the military alliance.

The conflict has killed more than 3,500 people and driven at least 615,000 from their homes, the United Nations estimates. Nine Ukrainian soldiers were killed three days ago, the most since the truce.

Assets, Trade

Putin justified annexing Crimea from Ukraine in March by saying Russia needed to protect Russian speakers on the Black Sea peninsula. Deputy Premier Dmitry Rogozin said yesterday the same reasoning would prompt his country to defend its citizens in the breakaway Moldovan region of Transnistria, the Interfax news service reported.

The resurgence in the conflict -- the worst standoff between Russia and its Cold War foes since the fall of the Iron Curtain -- has hit assets. The ruble weakened to a record against the dollar, losing 0.1 percent in Moscow as the Itar-Tass news service reported that presidential adviser Sergei Glazyev backs the idea of capital controls.

Ukraine’s hryvnia, this year’s worst-performing currency, was unchanged against the dollar, as Prime Minister Arseniy Yatsenyuk’s government and state-run energy company NAK Naftogaz repaid a $1.67 billion Eurobond. The debt, which came due at the end of September, was paid in full, Halyna Pakhachuk, head of the debt department at Ukraine’s Finance Ministry, said by e-mail yesterday.

EU Ire

EU leaders have refused to ease sanctions, deepening Russia’s economic woes, with the government in Moscow asking the central bank to consider providing foreign-currency swaps to banks. Sanctioned companies including state-run oil producer OAO Rosneft and gas producer OAO Novatek have asked for aid.

Russia, which says it wants to normalize ties with the U.S. and EU, also drew ire from the latter after its government adopted a decree proposing new trade barriers with Ukraine. The decree violates a deal under which the bloc delayed deepening trade ties with Ukraine until 2016, European Commission President Jose Barroso said in a letter to Putin.

“We consider that the application of this decree would contravene the agreed joint conclusions and the decision to delay the provisional application of the trade related part of the Association Agreement,” Barroso said in the letter, referring to the EU’s pact to draw closer to Ukraine, a process that Putin opposes.

Russia risks an escalation of EU sanctions if separatists make further military gains in eastern Ukraine, a person familiar with German government policy told Bloomberg yesterday.

Russian Foreign Minister Sergei Lavrov has said his country won’t change its position over Ukraine to win a repeal of sanctions. Ukraine accuses its neighbor of fomenting the unrest near the two nations’ border to prevent it from joining NATO and the EU following the ouster of President Viktor Yanukovych, an ally of Putin.

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