Ukraine Optimism Wavers on Peace as Cease-Fire Winds Down

June 26, 2014 JRL Russia List Ukraine, Russo-Ukrainian War

(Bloomberg – bloomberg.com – Kateryna Choursina, Patrick Donahue – June 26, 2014)

Ukraine isn’t “too optimistic” it will soon clinch a peace deal with separatist rebels in the east, a minister said, as the U.S. and the European Union raised pressure on Russia to ease violence that’s left hundreds dead.

With Ukraine’s government saying the pro-Russian militants have repeatedly flouted a cease-fire due to expire at 10 a.m. tomorrow, Economy Minister Pavlo Sheremeta said the conflict may drag on even as peace talks continue. “We are not too optimistic,” he told a conference in Kiev today. “Developments are moving in the right direction, but the situation is quite volatile.”

Progress in Ukraine “hasn’t been as apparent as I would have wished, considering the seven-day cease-fire,” German Chancellor Angela Merkel told reporters in Kortrijk, Belgium, before an EU summit starting today. The bloc’s leaders “will discuss how much further we want to go with sanctions,” depending on what they hear from Ukrainian President Petro Poroshenko in Brussels tomorrow, she said.

With momentum behind peace efforts flagging, the U.S. is preparing sanctions against Russia on technology aimed at exploiting and producing oil and gas products, a major part of that country’s economy, according to three people briefed on the plans. EU countries have been preparing possible deeper penalties since March.

Micex Drops

Russia’s Micex stock index slid 0.3 percent at 4:55 p.m. in Moscow. The hryvnia traded 0.4 percent stronger against the dollar. It’s weakened more than 30 percent this year, the worst performance among global currencies tracked by Bloomberg.

A day after Russian lawmakers voted to rescind the authorization they gave President Vladimir Putin on March 1 to use force in its neighbor, Russia agreed to new talks on July 11 with the EU and Ukraine, its Foreign Ministry said on its website today.

Poroshenko held talks yesterday with Putin and the leaders of Germany and France to discuss ways to end the months of fighting that’s killed more than 400 people. Putin spoke “in favor of extending the cease-fire and organizing a sustained negotiation process,” according to a statement by the Kremlin.

Poroshenko will present a draft constitution today in Strasbourg, France, to extend powers to the largely Russian-speaking regions in the east to ease tensions.

EU Accord

In Brussels tomorrow, the president will sign an accession accord with the EU whose rejection by his predecessor, Viktor Yanukovych, led to protests in Kiev that triggered the Ukraine crisis. The pact will damage the Russian economy, the Foreign Ministry in Moscow said.

The militants, who want to split from Ukraine and join Russia, have continued to attack government forces, defying the weeklong cease-fire declared by the government in Kiev and supported by both Putin and rebel leaders.

Rebels fired at checkpoints set up by government forces 13 times in the past 24 hours, Ukraine’s Foreign Ministry said in a statement. The militants also used mortars in an attack on Kramatorsk airport in the north of the Donetsk region, the ministry said, accusing them of using the truce to “relocate, reinforce their check-points and repair military vehicles.”

Death Toll

Separatists are holding more than 200 hostages, including foreigners, and have killed 145 Ukrainian servicemen and wounded about 300 since the fighting started, the Interfax news service cited Poroshenko’s representative on eastern issues, Iryna Herashchenko, as saying today. She said about 30,000 Ukrainians had fled the Crimean peninsula in the Black Sea after its annexation by Russia in March.

In draft conclusions before the summit, the EU echoed comments yesterday from U.S. Secretary of State John Kerry. He called for the halt of weapons from Russia into eastern Ukraine, including armored vehicles and anti-aircraft weapons.

The European Commission and “the member states have been undertaking preparatory work on possible targeted measures, as it requested in March, so that further steps can be taken should events in eastern Ukraine so require,” according to the draft seen by Bloomberg.

The U.S. and the EU have agreed sanctions have to be ready, Kerry said today after meeting French Foreign Minister Laurent Fabius.

“But our preference is not to have to be in a sanctions mode,” he said in Paris. “We would like to see a cooperative effort between the United States, Europe and Russia and the Ukrainians. And we are going to try to encourage that as much as we can.”

Sanctions Survey

The U.S. will hold off on measures targeting Russian industries, according to 83 percent of respondents in a Bloomberg survey of 23 economists, compared with 66 percent last month. The EU will refrain from sanctions according to a record 96 percent, up from 84 percent in May. The survey was conducted June 20-25.

Rebels have violated the truce more than 50 times since June 20, killing 18 people and wounding 27, Poroshenko said in a statement yesterday. Ukraine’s border service detected the presence of gunmen and Russian troops with military vehicles deployed on the Russian side of the frontier, according to the National Security Council.

The attacks and the expiration of the truce will probably lead to a renewed push by government forces against the separatists, Oleksiy Haran, a professor of comparative politics at the Kyiv-Mohyla Academy, said by phone today.

Demands on Russia

“Unless combat activity stops from the other side, Ukraine will have to continue,” he said. “We expect that the West will demand not words but actions from Russia. So far there were only words. But the border is still open, Russia continues to help” the separatists, he said.

Amid the unrest, Putin’s popularity among Russians continued to rise to near its 2008 peak this month, Moscow-based polling company Levada Center said in a statement. The Russian leader’s approval rating is 86 percent, up from 65 percent in January and compared with a highest-ever 88 percent. The number of those who disapprove of Putin’s actions in Ukraine fell to 13 percent from 16 percent, according to the June 20-23 poll of 1,600 people with a 3.4 percentage-point margin of error.