Putin calls Obama to discuss resolving Ukraine crisis

Bloomberg

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Russian President Vladimir Putin attends an award ceremony in the Kremlin on March 25, 2014 in Moscow.

Russian President Vladimir Putin and President Barack Obama dispatched their top diplomats for more discussions to resolve the Ukraine conflict after the leaders held an hour-long telephone conversation on the crisis.
Obama asked for a written response from the Russian leader to the plan that Secretary of State John Kerry presented to Russian Foreign Minister Sergei Lavrov in the Hague earlier this week, according to a statement from the White House.
Obama told Putin that a diplomatic solution “remains possible only if Russia pulls back its troops and does not take any steps to further violate Ukraine’s territorial integrity and sovereignty,” the White House said yesterday.
For his part, Putin highlighted a “rampage of extremists” intimidating officials and residents “in various regions,” according to a statement from his office. The Russian president also brought up the situation in Transnistria, a self-proclaimed republic wedged between Moldova and Ukraine with a Russian military presence that followed Crimea’s annexation by asking to join Russia.
Putin’s statement indicated he’s willing to examine “steps the global community can take” to stabilize Ukraine.
Hour-long call
The call between the two leaders lasted about an hour and they spoke while Obama was in Saudi Arabia, the final stop on a six-day trip that has been dominated by the situation in Ukraine. The U.S. and European Union have imposed two rounds of asset freezes and travel bans on Russian and Ukrainian officials and associates of Putin, with the threat of economic sanctions if the confrontation escalates.
The White House statement didn’t detail what plan Kerry and Lavrov discussed. In previous meetings, Kerry called for talks between Russia and the Ukrainian government with international participation, and sending monitors into Ukraine, including Crimea. Russia would be able to keep its bases on the Black Sea peninsula as long as Ukraine’s sovereignty was respected.
No date for a meeting between Kerry and Lavrov was given.
Over three days in Europe, Obama sharpened the U.S. response to Russia’s incursions into Ukraine. At a summit originally intended to discuss nuclear security and through an emergency meeting of the Group of Seven nations, the U.S. and its allies presented unified opposition to Russia’s actions.
Troop buildup
U.S. officials have warned that the presence of Russian forces on Ukraine’s eastern border suggests that Putin may seek to carve off more of Ukraine’s east and south. Obama urged Putin to pull Russia’s military back from Ukraine’s frontier.
While U.S. intelligence officials continue to monitor what they say is a significant buildup of Russian troops near eastern Ukraine, some expressed concern that Putin’s sudden mention of Transnistria may be a prelude to a different move.
Speaking on the condition of anonymity to discuss intelligence assessments, two officials said that the visible military movements in the east may be “maskirovka” -- a Russian term for deception -- to distract attention from preparations to move into the small separatist Transnistria region through the Ukrainian Black Sea port of Odessa. Russian forces held what was called an anti-terrorism drill in the region this week.
Another possibility, U.S. Air Force General Philip Breedlove, NATO’s supreme commander in Europe, said March 23 in Brussels, is a Russian move all the way from Ukraine’s eastern border past Crimea to Odessa and Transnistria -- a move that would leave Ukraine landlocked. The region, he said, may be “the next place where Russian-speaking people may need to be incorporated.”
McCain’s assessment
U.S. Senator John McCain, an Arizona Republican, echoed that concern.
Because Moldova is not a NATO country, a U.S.-led NATO force response there would be “very questionable,” McCain said in an interview for Bloomberg Television’s “Political Capital with Al Hunt” airing this weekend.
The annexation of Crimea was met by sanctions from the U.S. and the European Union against Russian and Ukrainian officials and businessmen with ties to the Kremlin.
Obama vowed this week that further land grabs in Ukraine would trigger sanctions that target more vital sectors of the Russian economy. Any military response would be reserved for Russian action against a North Atlantic Treaty Organization ally, such as Poland or one of the Baltic republics.
Russian economy
Concern that Russia’s economy would suffer from an extended confrontation over Ukraine has helped push the benchmark Micex Index (OPNMICX) down 10.6 percent this year. With emerging-market stocks rallying amid confidence in the global economy, though, the index rose 0.9 percent yesterday to 1,344.12.
Russia’s Baa1 government bond rating may be cut by Moody’s Corp., the ratings company said yesterday in a statement after the close of U.S. markets. The move was triggered by a weakening of Russia’s economy and uncertainty created by the Ukraine conflict, Moody’s said in a statement.
European and Asian allies have rallied around the U.S. position, suspending Russia from the Group of Eight major industrial powers and jointly laying down a threat of “sectoral” sanctions should Russia invade other parts of Ukraine. Even so, the stance skirted tough questions on what those sanctions might be.
U.S.-based companies are the largest source of foreign investment in Russia, primarily in technology and financial services, according to a 2013 report by Ernst & Young. They include General Electric Co. (GE), Boeing Co. (BA), and Caterpillar Inc. (CAT)
Exxon Mobil Corp. (XOM) and OAO Rosneft (ROSN) had been set to start their first Arctic well this year, targeting a deposit that may hold more oil than Norway’s North Sea.
Economic pressure
To maintain pressure on Putin, McCain said he U.S. should consider forcing U.S. companies such as GE and Exxon Mobil to suspend business in or pull out of Russia if it attempts to take more territory from Ukraine or other neighboring nations.
As part of U.S. efforts, the Congress is poised to pass legislation that includes about $1 billion in loan guarantees and authorizes $150 million in direct assistance to Ukraine.
The U.S. Senate approved a plan this week, and the House of Representatives is scheduled to vote on it April 1. The aid was also linked to Ukraine reaching a deal with the International Monetary Fund. The IMF has unveiled a preliminary accord with Ukraine for a two-year loan of $14 billion to $18 billion designed to help the country avert default.
Ukraine’s government is grappling with dwindling reserves, a weakening currency, and an economy threatening to slide into a third recession in six years.

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