Photographer: Sergei Supinsky/AFP via Getty Images

Russia Warns of Consequences From Deaths as Ukraine on Alert

  • Putin vows ‘serious additional measures’ on annexed peninsula
  • Ukrainian officials say Russia wants to escalate conflict

Russia said the deaths of servicemen in Crimea would carry “consequences” and Ukraine put its troops on “high alert,” warning that Vladimir Putin is seeking to reignite the conflict in the disputed territories.

The Foreign Ministry in Moscow raised the threat of retaliation a day after the Russian president vowed to respond with “very serious” measures and said Ukrainian agents had engaged in “terror” tactics on the Black Sea peninsula, which Putin seized in 2014. Poroshenko dismissed the accusations as “fiction” that could be an “excuse for further military threats” by Russia.

The worst diplomatic standoff between the two countries since a truce signed last year raised alarm in foreign capitals and reverberated across markets. The confrontation coincided with a surge in violence in Ukraine’s eastern territories, where government troops have been locked in a struggle against pro-Russian separatists. It also torpedoed plans to revive four-way peace talks at the September G-20 meeting in China.

“This is a very tense time,” U.S. State Department spokeswoman Elizabeth Trudeau told reporters in Washington late on Thursday. “It’s time to take a step back, we’re calling on all sides to reduce.”

Bolstering Security

The cost of insuring Russian debt against default climbed the most in five weeks as tensions escalated Thursday, while the ruble weakened 0.1 percent against the dollar at 10:27 a.m. in Moscow on Friday. Ukraine’s hryvnia was down the same amount against the greenback. The yield on its dollar-denominated note maturing in 2019 rose 1 basis point to 7.802 percent after soaring on Thursday.

Pro-Russian rebels attacked government troops near the separatist-held cities of Donetsk and Luhansk and the Black Sea port of Mariupol, held by government troops, overnight. They used mortars, anti-aircraft weapons and small arms, Ukraine’s military said in a statement.

Putin discussed bolstering Crimea’s defenses with his Security Council, a day after he said Ukrainian intelligence officers killed two Russian servicemen during covert operations in Crimea. Russia may cut diplomatic ties with Ukraine, recalling embassy staff, newspaper Izvestia reported Friday, citing an unidentified person in Russian foreign-policy circles.

For a Q&A on the flareup in tension in Crimea, click here.

Ukraine’s United Nations mission called for “urgent” Security Council consultations over Russia’s comments. NATO said it was closely monitoring the heightened tensions, and both it and the U.S. said they had seen no evidence corroborating Russia’s allegations.

Poroshenko put troops monitoring the border with Crimea and areas held by separatists in the country’s eastern Luhansk and Donetsk region on alert. He ordered the Foreign Ministry to organize phone calls with Putin and U.S. Vice President Joe Biden. He also sought to speak with other leaders, including German Chancellor Angela Merkel, whose Foreign Ministry called the events in Crimea “worrying.”

Russian Foreign Minister Sergei Lavrov spoke to his French counterpart, Jean-Marc Ayrault, who called for both sides to avoid escalation.

For more details on the conflict in Ukraine, click here.

Putin has exhibited a tendency to use instability in the region as leverage in negotiations. He also has launched military operations while the world’s attention is on the Olympic Games and many leaders are on vacation. The annexation of Crimea came just after Russia hosted the Sochi Olympics, and Russia sent troops into Georgia during the Beijing Olympics in 2008.

“August is the best time for Moscow’s military action because Western decision makers are on holidays,” Anders Aslund, a senior fellow at the Atlantic Council, wrote in a blog post. “The Berlin Wall was initiated in August 1961, the invasion of Czechoslovakia occurred in August 1968, and the Moscow coup took place in August 1991.”

Ukraine has accused its fellow former Soviet republic of funneling cash, weapons and fighters to the separatists who have seized control of much of Donetsk and Luhansk, largely industrial areas known together as Donbas, in a conflict that the UN estimates has killed almost 10,000 people. Western countries have refused to recognize Russia’s takeover of Crimea and have imposed sanctions that have helped force the world’s biggest energy-exporting economy into recession.

“The reason why we’re in this situation in the first place is because of Russia’s illegal annexation of Crimea,” said Peter Wilson, the U.K.’s ambassador to the UN.

On Wednesday, Putin reversed his backing of resuming talks in China tied to the cease-fire signed in Belarus in February 2015, calling them “pointless.” Lack of support for the Minsk agreement -- a long-term resolution calling for both sides to pull back weapons, for Ukraine to regain control of its border and to change its constitution, and for elections to take place in separatist-held areas -- may suggest he’s satisfied to keep the region unstable.

“Russia is hardly dissatisfied with the status quo,” Eurasia Group analysts including Alexander Kliment said in a note. “While the Kremlin would favor some progress toward the implementation of the Minsk Protocols (which would lock in Russia’s influence over Ukraine in perpetuity, while costing Kiev’s leadership greatly at home), Moscow is also content with what is a relatively favorable situation.”

Watch Next: Putin in Two Minutes

Putin in Two Minutes: A Quick Look Into His Soul
Before it's here, it's on the Bloomberg Terminal.
LEARN MORE