Russia Won’t Accept Terms to End Sanctions Over Ukraine

Russia’s top diplomat said his country won’t accept conditions to end sanctions after talks in Italy produced no breakthrough over the truce in Ukraine as the German chancellor criticized implementation of the peace plan.

Russia has been told to comply with various criteria before the U.S. and its allies revoke the penalties, Foreign Minister Sergei Lavrov said in a transcript of an NTV interview posted yesterday on the ministry’s website. German Chancellor Angela Merkel said it wasn’t yet possible to “speak about a real implementation” of last month’s agreement for any change in the restrictions levied against Russia.

The cease-fire in Ukraine’s easternmost regions, sealed Sept. 5, was broken several times during the past 24 hours, with two soldiers and 14 pro-Russian fighters killed, the military said today. The U.S. and the European Union slapped restrictions on Russian officials and companies after the March annexation of Crimea and July’s downing of a Malaysian passenger plane over eastern Ukraine. Russia denies stoking its neighbor’s conflict, which the United Nations estimates has cost more than 3,500 lives.

“The conflict with Russia is de-escalating slowly, in little bite-sized chunks,” Jan Dehn, the London-based head of research at Ashmore Group Plc, said in a report. The “toughest diplomatic hurdles still have to be overcome.”

Policy Doomed?

Russia’s partners, including overseas politicians and businessmen, understand that a policy designed to punish the country is doomed to failure, Lavrov said.

“We respond very simply: we shall not agree to any criteria or conditions,” Lavrov said. “Russia is doing more than anyone else to resolve the crisis in Ukraine.”

Speaking in Moscow today, Lavrov told reporters that a political solution is possible to end Ukraine’s crisis.

Merkel, Ukrainian President Petro Poroshenko and Russian leader Vladimir Putin sought during talks in Milan last week to shore up a six-week truce amid continuing skirmishes between government troops and separatists.

The airport in Donetsk, the biggest Ukrainian city in the conflict zone, twice came under attack today by rebels, who used mortars and artillery, according to the military’s press office. Insurgents targeted government troops in five towns during the day, it said.

Donetsk was also rocked by a “powerful” explosion today that probably occurred near a chemical plant, according to local authorities, who provided no other details.

‘Too Far’

“On the question of sanctions, the main priority is implementing the peace plan of President Putin and President Poroshenko, the Minsk agreement,” Merkel said at a news conference in the Slovak capital, Bratislava. “And here, we are unfortunately still too far away on many points of it to speak about a real implementation.”

The EU and the U.S., which have limited technology exports to Russia and curbed the ability of state-run banks to raise funds abroad, have accused Putin’s government of providing the rebels with cash, weapons and fighters.

Energy has been another focus of Ukraine’s economic woes. Putin, whose nation pipes about 15 percent of the EU’s natural gas needs through Ukraine, said last week that supplies to Europe would be reduced if the Ukrainian government siphoned off fuel for its own use. Ukraine has said it won’t take any gas bound for Europe and that it’s a reliable transit country.

Gas Dispute

Ukraine will have gas for the winter after agreeing to pay $385 per thousand cubic meters of fuel from Russia until March 31, Poroshenko said. The government may use loans from the International Monetary Fund or other financial organizations to pay for the purchases, he said.

The EU has been seeking to broker an interim deal between Putin and Poroshenko to avoid a repeat of supply cuts experienced in 2006 and 2009. The next round of talks is scheduled to take place tomorrow.

Speaking today, Merkel said she wants the gas deal to be clinched and that a bridge loan for Ukraine may be needed to end the dispute.

Ukraine’s state energy company NAK Naftogaz Ukrainy said the government in Kiev and the European Commission reached a “consensus” before the trilateral talks slated for tomorrow in Brussels. According to their joint position, the negotiations should produce an interim agreement for this winter, ensuring the supply of Russia’s gas to Ukraine and a stable flow of transit fuel to the EU, with guarantees on delivery by Moscow-based OAO Gazprom and on payments by Naftogaz.

‘Gradual Removal’

At a joint appearance with Merkel, Slovak Prime Minister Robert Fico said the successful implementation of the accord between Russia and Ukraine may pave the way for the easing of sanctions. His country, along with former Soviet satellites including Hungary and the Czech Republic, has been critical of the trade restrictions for hurting their economies.

“If what has been agreed between the Russian and Ukrainian presidents is carried out, it could open a debate on the gradual removal of sanctions,” Fico said.

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