US takes swing, Russia ups pressure

06:43, Mar 04 2014
John Kerry
TO KIEV: US Secretary of State John Kerry is heading to Ukraine.

Russia has paid a heavy financial price for its military intervention in neighbouring Ukraine with stocks, bonds and the rouble plunging.

The Moscow stock market fell 10.8 per cent, wiping nearly US$60 billion (NZ$72b) off the value of Russian companies.

The central bank spent as much as US$12b (NZ$14b) of its reserves to prop up the rouble as investors reacted to Russian tensions with the West.

Moscow protest
PRO RUSSIA: People marched in Moscow on Sunday in support of native-Russian speakers in Crimea and Ukraine.

Russia President Vladimir Putin declared at the weekend he had the right to invade Ukraine to protect Russian interests and citizens and today there were believed to be 16,000 Russian troops on the ground in the Crimea - a strategically important peninsula in the south of Ukraine.

Today the United States began spelling out its response to Russia's incursion, saying it had suspended all military exercises and port visits with Russia and put trade and investment talks with Moscow on hold.

President Barack Obama met for over two hours with his national security advisers to discuss what steps the US and its allies could take to ''further isolate'' Russia, a White House official said.


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''Over time this will be a costly proposition for Russia. And now is the time for them to consider whether they can serve their interests in a way that resorts to diplomacy as opposed to force,'' Obama said.

The US State Department said sanctions on Russia were being prepared, although no decisions had yet been made.

Members of the US Congress were looking at options, including sanctions on Russia's banks and freezing assets of Russian public institutions and private investors, but they said they wanted European countries to step up their involvement.

Ukraine Map

New Zealand's Government announced yesterday that its free trade talks with Russia had been suspended.

Secretary of State John Kerry would propose ways in which a negotiation between Russia and Ukraine could be overseen by a multilateral organisation when he went to Kiev today, Obama said.

The European Union today threatened unspecified ''targeted measures'' unless Russia returned its forces to their bases and opened talks with Ukraine's new government.

Western leaders have sent a barrage of warnings to Putin against armed action, threatening economic and diplomatic consequences, but were not considering a military response.


In his first public appearance for nearly a week, Putin flew to watch military manoeuvres in western Russia in what appeared to be a show of strength.

Russia's Black Sea fleet denied reports it had given Ukrainian forces in Crimea an ultimatum to surrender by early Tuesday (local time) or face attack, the Interfax news agency said. The US said any such threat would be a dangerous escalation.

Ukraine's acting president said Russia's military presence in Crimea was growing. Ukrainian officials said Russia was building up armour on its side of the 4.5km wide Kerch strait between the Crimean peninsula and southern Russia.

Russian forces later began shipping truckloads of troops by ferry into the Crimea region after seizing the border post on the Ukrainian side, Ukraine's border guards spokesman said.

A Reuters reporting crew at the ferry terminal in Crimea later on Monday (local time) saw no sign of unusual activity.

Kiev's UN ambassador, Yuriy Sergeyev, said Russia had deployed roughly 16,000 troops to Crimea since last week.

Both sides have so far avoided bloodshed, but the market turmoil highlighted damage the crisis could wreak on Russia's vulnerable economy, making it harder to balance the budget and potentially undermining business and public support for Putin.

Russian Deputy Economy Minister Andrei Klepach said market ''hysteria'' would subside but that strains with Brussels and Washington would continue to weigh on the economy.

On the ground in Perevalnoye, halfway between the Crimean capital, Simferopol, and the Black Sea, hundreds of Russian troops in trucks and armoured vehicles were surrounding two military compounds.

The troops, who had no national insignia on their uniforms, were confining Ukrainian soldiers, who have refused to surrender, as virtual prisoners.

Ukraine called up reservists on Sunday (NZT Monday) after Putin's action provoked what British Foreign Secretary William Hague called ''the biggest crisis in Europe in the twenty-first century''.

The US Defense Department said that although it found value in military-to-military relations with Russia, ''we have, in light of recent events in Ukraine, put on hold all military-to-military engagements''.

Rear Admiral John Kirby added that despite media speculation about possible ship movements in the region, ''there has been no change to our military posture in Europe or the Mediterranean''.

Nato allies would soon hold emergency talks on the crisis, for the second time in three days, following a request from Poland, a neighbour of Ukraine.

European Union foreign ministers held out the threat of sanctions against Russia on Monday if Moscow failed to withdraw its troops from Ukraine, while offering to mediate between the two, alongside other international bodies. EU leaders would hold an emergency summit on Thursday.

But possible divisions emerged, with the BBC citing a document, inadvertently shown to a photographer, that said Britain opposed trade sanctions on Russia and did not want to shut London's financial capital to Russians in response to the Kremlin's intervention in Ukraine.

A spokeswoman for British Prime Minister David Cameron's office said it did not comment on leaked documents. But she added: ''The Prime Minister is clear that continuing to violate Ukraine's sovereignty will have costs and consequences.''


The Organisation for Security and Cooperation in Europe, or OSCE, said it was trying to convene an international contact group to help defuse the crisis after Germany said Chancellor Angela Merkel had persuaded Putin to accept such an initiative.

Switzerland, which chaired the pan-European security body, said the group could discuss sending observers to Ukraine to monitor the rights of national minorities.

''There will be very, very broad consensus for that monitoring mission. We call on Russia to join that consensus, make the right choice and pull back its forces,'' US Assistant Secretary of State Victoria Nuland told OSCE envoys in Vienna.

The Russian central bank raised its key lending rate by 1.5 percentage points after the rouble fell to all-time lows.

Tension over Ukraine also knocked 2 to 3 per cent off European stock markets and 1 per cent off Wall Street, and sent safe haven gold to a four-month high.

Chicago wheat futures rose more than 5 per cent and corn about 4 per cent amid fears of disruption to shipments from the Black Sea, a major grain-exporting zone.

Russian gas monopoly Gazprom, which supplies Europe through Ukraine, was down nearly 14 per cent.

Gazprom's finance chief warned Ukraine that it may raise gas prices from next month, accusing Kiev of a patchy payments record, but said gas transit to Europe was normal.

Ukraine has been stocking up on gas imports in the past few days to beat a feared rise, a spokesman for its gas transit monopoly said.

Ukraine's pro-Western prime minister, Arseny Yatseniuk, whose government took power when Yanukovich, a Russian ally, fled on February 21 after three months of street protests, said Putin had effectively declared war on his nation.

Yatseniuk said the government planned to cut spending by 14 to 16 per cent as Ukraine prepared for talks with the International Monetary Fund to avert the danger of default.


Russian forces seized Crimea, an isolated Black Sea peninsula with an ethnic Russian majority, without firing a shot.

All eyes were now on whether Russia would make a military move in predominantly Russian-speaking eastern Ukraine, where pro-Moscow demonstrators have marched and raised Russian flags over public buildings in several cities in the last three days.

Pro-Russian protesters besieged lawmakers inside the regional government building in the eastern city of Donetsk, Yanukovich's hometown, on Monday in the latest such action.

Russia has staged war games with 150,000 troops along the land border, but so far they had not crossed. Kiev said Moscow was orchestrating the protests to justify a wider invasion.

At an emergency Security Council meeting, Russia's UN ambassador and Western envoys hurled allegations at each other for two and a half hours.

''Under the influence of Western countries, there are open acts of terror and violence,'' Russian envoy Vitaly Churkin quoted the letter from Yanukovich as saying, brandishing a copy of it.

''People are being persecuted for language and political reasons.''

Churkin repeated Moscow's view that Yanukovich was Ukraine's legitimate leader, not interim President Oleksander Turchinov.

US envoy Samantha Power said there was no evidence ethnic Russians or Russian-speakers in Ukraine were under threat.

Power said there was ''no legal basis'' for Russia to justify its military deployments in Ukraine through an invitation from the regional prime minister of the Crimea, adding only Ukraine's parliament could do that.

Churkin shot back that Power appeared to have gotten all her information about Ukraine ''from US TV''.

A German spokesman said Merkel believed it wasn't too late to resolve the Ukrainian crisis by political means.

The German leader, who spoke fluent Russian, has had several long telephone calls with the German-speaking Putin since the crisis erupted with mass protests in Kiev, creating a major policy dilemma for Berlin, which was heavily dependent on Russian gas and had close economic ties.

Russian Foreign Minister Sergei Lavrov met his German counterpart, Frank-Walter Steinmeier, in Geneva on Monday, a Russian diplomat said.

Lavrov will meet EU foreign policy chief Catherine Ashton in Madrid today, RIA Novosti agency said.

On Kiev's Independence Square, or Maidan, where anti-Yanukovich protesters manned barricades for three months, crowds were smaller than in recent days as people returned to work.

''Crimea, we are with you!'' read one placard.

''Putin - Hitler of the 21st century,'' read another.