Ukraine accord doubts grow as protesters refuse to disarm

Bloomberg

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Tension intensified over the weekend after deadly clashes between Ukrainian security personnel and pro-Russian separatists who have seized police and government buildings across eastern Ukraine.

As the interim Ukrainian government pledged to abide by a four-nation deal reached in Geneva, pro-Russian protesters balked, creating a test of whether Russia will help defuse the crisis.
Acting Ukrainian Prime Minister Arseniy Yatsenyuk’s government suspended its anti-terror operations in the country’s east and expressed a readiness to pursue constitutional revisions. A separatist leader refused to disarm and vacate seized property and public places until Yatsenyuk’s administration steps down.
The discord adds to the skepticism about whether Ukraine, the U.S., and the European Union will be able to use the Geneva accord to hold Russian President Vladimir Putin accountable for de-escalating tensions he and his associates deny they’ve had any role in creating. U.S. and EU officials yesterday reiterated their readiness to deepen sanctions against Russia, which they say has massed 40,000 troops on Ukraine’s border and is fomenting unrest after annexing Crimea last month.
Today’s developments don’t mean Russia is “necessarily reneging on the deal, as it is more of an effort for them to test the deal” and see how they can “avoid sanctions without trying to change the situation on the ground,” said John Herbst, a former U.S. ambassador to Ukraine.
Obama ‘skeptical’
U.S. President Barack Obama was already predicting such Russian moves when he made a “pessimistic and skeptical” statement on Apr. 17, saying he doesn’t think anything is certain, Herbst said in a telephone interview yesterday.
“Realistically, no one is going to claim the deal is going to fall apart within 18 to 20 hours of conclusion,” Herbst said by phone, adding that he expects no decision on further sanctions until April 21 or 22 “at the earliest.”
Denis Pushilin, a leader of the separatist, self-proclaimed Donetsk People’s Republic, which has seized buildings in an eastern city in Ukraine, refused to leave, saying the Kiev government “came to power after an armed and illicit” ouster of pro-Russian President Viktor Yanukovych in February.
Russia’s Foreign Ministry said it’s “disappointed” by the U.S. assessments of the talks and called threats of new sanctions “completely unacceptable.”
Obama’s National Security Adviser Susan Rice said the U.S. expects Russia to use its influence over militias in Ukraine, adding that the U.S. and its allies “remain ready to impose additional costs” if terms of the agreement aren’t followed.
Watching closely
“It’s not the words, it’s the actions, so we will be watching very closely over the coming days,” Rice told reporters yesterday in Washington, declining to set a deadline.
Secretary of State John Kerry said in Geneva April 17 that the U.S. will have “no choice but to impose further costs on Russia” if no implementation is seen this weekend.
U.K. Foreign Secretary William Hague backed the Obama administration by expressing his support for more sanctions “if Russia doesn’t follow through” in a posting yesterday on Twitter, Inc.. (TWTR)
Officials from the U.S. Treasury Department and the National Security Council told mutual-fund and hedge-fund managers last week in Washington that the administration is planning additional sanctions against Russia over the conflict in Ukraine, according to a person who attended and asked not to be identified because the discussions weren’t public.
An Obama administration official warned this week that if the talks fail, the U.S. is ready to target people in Putin’s inner circle and the entities they oversee. Industry-specific sanctions are also an option, according to the official, who spoke about private talks on condition of anonymity.
Falling ruble
Russian stocks rose the most in more than three weeks by the close yesterday in Moscow, while the ruble weakened as investors have been selling Russian securities, causing the currency to fall 7.6 percent against the dollar this year. The cost of protecting $10 million of investment in Russian sovereign debt through the credit default swap market has risen to $248,000 annually for five years from $166,000 at the end of last year, according to data provider CMA, a unit of McGraw Hill Financial Inc.
Despite the tough talk and NATO moves to bolster its military presence in Central and Eastern Europe, Putin may be betting that the U.S. and EU are too divided to agree on significant sanctions unless Russia launches an outright invasion of Ukraine, two U.S. officials said yesterday. Both requested anonymity to discuss internal policy deliberations.
Advantage Putin
“Putin’s big advantage is that he is facing an opponent that has completely split views,” Michael Romancov, a political scientist at Charles University in Prague, said by phone. “The hard-line attitude from a few countries like Poland won’t achieve anything, unless there’s a united front.”
The EU relies on Russia for about 35 percent of its crude oil needs and 30 percent of its gas, according to European Commission data. One bloc, in an arc from Estonia in the northeast through Austria and down to Greece in the southeast, gets more than 75 percent of its gas imports from Russia.
Germany belongs to a second group, with Russian gas accounting for about 38 percent of its imports, according to AG Energiebilanzen e.V., which compiles energy statistics.
In addition to the prospect that Russia might curb gas supplies to nations that support tougher sanctions, there’s the prospect of lost business opportunities if the crisis escalates.
Royal Dutch Shell Plc (RDSA), based in The Hague, said yesterday that it plans to expand an oil and natural gas project in Russia’s Far East after Chief Executive Office Ben van Beurden won a promise of support for the plan from Putin at a meeting at the Russian leader’s residence near Moscow.
Sanctions boomerang
“The EU sanctions threat isn’t credible -- and worse, it could backfire,” Andrews Goldthau, a visiting scholar at Harvard University’s Belfer Center for Science and International Affairs in Cambridge, Massachusetts, said by phone. “There’s no way that the EU can put in place sanctions without hurting the West and hurting the West hard.”
If the Geneva deal fails and the crisis worsens again, a key factor for eastern EU leaders will be how fast Putin moves to reassert Russian hegemony over Ukraine and other Russian-speaking regions, such as the breakaway Moldovan territory of Transnistria, according to a person who was present at a recent EU summit.
If Russia invades Ukraine, the EU and the U.S. will be forced into a tough response, said the person familiar with the talks, who spoke on condition of anonymity because the debate was private.

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