Ukraine In ‘Undeclared War’ With Russia As Rebels Unite -- Bloomberg Businessweek
Insurgents killed seven Ukrainian soldiers and wounded eight others in an ambush near an eastern rebel-held stronghold as the defense minister said the country was fighting an “undeclared war” with Russia.
More than 30 attackers struck a convoy near the Donetsk region city of Kramatorsk at about 1 p.m., according to a statement by the Defense Ministry, which said that six paratroopers were killed. Another died later during transport to the hospital, according to Interfax.
“Russia is already engaged” in Ukraine “in supporting Russian-led protesters and terrorists,” Ukrainian Prime Minister Arseniy Yatsenyuk told reporters in Brussels today after talks with European Commission President Jose Barroso. “We urge Russia to condemn them, to urge all these so-called protesters -- or really, terrorists -- to leave and vacate the buildings, and to do everything they can to stabilize the situation in Ukraine. Russia will fail to make Ukraine a failed state.”
As fighting flared, Europe tried to rev up diplomatic efforts, with Germany’s Foreign Minister Frank-Walter Steinmeier visiting Kiev and Odessa in a bid to broker talks between the central government and pro-Russian separatists. Russia would face new sanctions if the scheduled presidential election on May 25 is disrupted, French President Francois Hollande said in Tbilisi, the capital of the former Soviet republic of Georgia, which fought a war with Russia over a breakaway region in 2008.
Separatists Unite
The self-styled Donetsk People’s Republic and neighboring Luhansk agreed to unite today, a day after declaring themselves sovereign states. Donetsk said 90 percent of voters backed splitting from Ukraine in a May 11 referendum that was rejected by the U.S. and European Union as illegitimate and marred by irregularities. Luhansk reported a similar ballot result.
The events echo Russia’s annexation of Crimea in March, Ukraine’s government and its U.S. and European allies say President Vladimir Putin is stoking unrest that’s threatening to rip apart the former Soviet republic ahead of the presidential vote.
“In our eastern regions we have an undeclared war,” acting Defense Minister Mykhaylo Koval told reporters in Kiev today. “Our neighboring country unleashed the war, sending special forces and saboteurs into our territory.”
EU Sanctions
EU foreign ministers froze the assets of companies for the first time, including oil and natural-gas producer Chernomorneftegaz, after they were expropriated during Russia’s Crimea’s annexation. They added 13 people to a list of individuals facing asset freezes and travel bans for destabilizing Ukraine and threatened more measures, along with the U.S., to target entire Russian industries.
The EU will soon disburse the first package of 600 million euros ($823 million) of a total amount of 1.6 billion euros of macro-financial assistance to Ukraine, Barroso said today.
Russian stocks advanced on bets the latest penalties won’t hurt the economy. The Micex Index (INDEXCF) jumped 0.7 percent to 1,385.29, advancing for a fifth day and paring its drop since the start of Russia’s intervention in Crimea on March 1 to 4.1 percent. The ruble strengthened 0.6 percent to 34.8335 per dollar, according to data compiled by Bloomberg, extending its gain since Feb. 28 to 3 percent.
Ukraine’s hryvnia was 0.5 percent weaker to the dollar, bringing its loss to 30 percent since the start of the year.
Compromise Deal?
“It is still hard to see the shape of any compromise deal at this point in time, as the federal structure which is being pushed by Russia and the separatists in south-east Ukraine is simply unacceptable to the administration in Kiev, and those in the west of the country,” Timothy Ash, an emerging-markets economist at Standard Bank Plc in London, said in an e-mail.
If Donetsk and Luhansk secede, Ukraine would lose about a fifth of its economic output, Bank of America (BAC:US) analyst Vadim Khramov said in an e-mailed report today. As for Russia, the tension may cost it $115 billion, or about 3 percent of annual output, and exacerbate recessionary pressure, said Nariman Behravesh, chief economist at consultancy IHS Inc. (IHS:US), said in an e-mail today.
“While Russia could end up paying a very heavy economic price for its annexation of Crimea and its ongoing conflict with Ukraine, the negative impacts on other parts of the world, notably Europe, will also be hard to avoid,” Behravesh said.
