The stand-off between Russia and the G7 over Moscow’s intervention in the Ukrainian region of Crimea continues. Financial markets have been reacting sharply to developments – the Russian central bank has hiked interest rates 1.5 percentage points after the rouble fell. UK Foreign Secretary William Hague is among the senior foreign officials visiting Kiev on Monday.
By John Aglionby and Leyla Boulton in London, Shannon Bond in New York and FT correspondents around the world
Jack Farchy, one of the FT’s Moscow correspondents, reports that Russian Foreign Minister Sergei Lavrov spoke to his Chinese counterpart Wang Yi today to discuss Ukraine, according to the Russian foreign ministry.
According to the Russian side, there was:
“a broad convergence of opinion between Russia and China on the situation”.
Here’s the FT story on the Russian central bank raising interest rates by 1.5 percentage points to 7 per cent. It justified the move in a short statement, saying:
“The decision is directed at preventing the emergence of risks for inflation and financial stability associated with the recently observed increased levels of volatility in financial markets”.
Nicholas Burns, professor at Harvard’s Kennedy School and former undersecretary of state, writes in the FT that the Ukraine crisis is the most serious threat to Europe’s security since the end of the cold war.
Burns is confident that:
The west will not fight Mr Putin for Ukraine and he knows it. That is why, in part, he felt emboldened to act. Americans and Europeans must therefore go on the offensive in another way – by raising the costs to Mr Putin for his reckless actions.
But he concludes that Putin is likely to end up losing:
The struggle for Ukraine is shaping up to be the kind of contest for power with the Russians that cold war US presidents managed so effectively. Advantage in such a long, twisting contest should shift, in the end, to the stronger, more mature and democratic governments. Mr Putin’s Russia is not among them.
Peter Spiegel, the FT’s Brussels bureau chief, writes that preparations are already underway for today’s emergency meeting of EU foreign ministers in Brussels, which starts at 1pm local time. Ambassadors from EU countries who handle foreign policy issues — called the “political and security committee” — convened at 8:30am to work out the ministers’ agenda, which as of late Sunday night was still up in the air.
Early indications are that the EU is looking towards a strongly-worded condemnation along the lines of similar statements late Sunday from Nato
and the G7 rather than a quick move to sanctions against Russian interests.
Here’s the statement issued last night by leaders of the G7 – Canada, France, Germany, Italy, Japan, the United Kingdom and the United States – and the President of the European Council and President of the European Commission.
We join together today to condemn the Russian Federation’s clear violation of the sovereignty and territorial integrity of Ukraine, in contravention of Russia’s obligations under the UN Charter and its 1997 basing agreement with Ukraine. We call on Russia to address any ongoing security or human rights concerns that it has with Ukraine through direct negotiations, and/or via international observation or mediation under the auspices of the UN or the Organization for Security and Cooperation in Europe. We stand ready to assist with these efforts.
We also call on all parties concerned to behave with the greatest extent of self-restraint and responsibility, and to decrease the tensions.
We note that Russia’s actions in Ukraine also contravene the principles and values on which the G-7 and the G-8 operate. As such, we have decided for the time being to suspend our participation in activities associated with the preparation of the scheduled G-8 Summit in Sochi in June, until the environment comes back where the G8 is able to have meaningful discussion.
We are united in supporting Ukraine’s sovereignty and territorial integrity, and its right to choose its own future. We commit ourselves to support Ukraine in its efforts to restore unity, stability and political and economic health to the country.
To that end, we will support Ukraine’s work with the International Monetary Fund to negotiate a new program and to implement needed reforms. IMF support will be critical in unlocking additional assistance from the World Bank, other international financial institutions, the EU, and bilateral sources.
UK Foreign Secretary William Hague has just told the BBC from Kiev:
“It’s is certainly the biggest crisis in Europe in the 21st Century,”
On the broader financial markets the escalating tension has weighed on equities, lifting commodities and motivating investors to seek shelter in havens.
FT markets reporter Andrew Bolger reports that after falls in Asia, London’s FTSE 100 opened 93 points lower at 6,715.73, a drop of 1.38 per cent, while Germany’s DAX shed 237 points to 9,453.12, down 2.44 per cent.
Brent crude oil rose 1.8 per cent to a 2014 high of $110.96 per barrel. The price of gold also rose, climbing $16.80 or 1.3 per cent to $1,343 per ounce, nearing its highest level since October.
S&P 500 futures were pointing to a 1 per cent drop at the open of trading in New York, after the benchmark US index finished last month at a record high.
Jack Farchy reports from Moscow that authorities are trying to control speculation on the financial markets:
Here are a couple of charts showing how the rouble’s been behaving recently:
More from William Hague – in a BBC interview:
Russia is entitled to have troops and naval forces in the Crimea. Russia needs to return to bringing in its bases, having its assets in Crimea, and neither the leadership in the Ukraine or other European countries are hostile to that.
We are not playing this as a zero sum game – Ukraine should be free to have closer associations with the European Union and the entire region can benefit, but of course they will always have their links with Russia and Russia will always have legitimate interest.
What we do in subsequent weeks depends on Russia’s behaviour. The G7 countries are entirely capable of cooperating well among themselves without Russia and will increasingly move in that direction if these issues can’t be resolved.
It requires a readiness in the Ukraine to act in a way that unites their country and that deals with the corruption and creates a new political country so that they are truly a free and democratic country that can make their own decisions.
Simon Derrick, chief market strategist at BNY Mellon has written a commentary on the likely economic effects of the Ukraine crisis. Here are some of his thoughts:
Potential impact of conflict on Russian economy
At the end of last week Russian media reported that Russia’s state budget and Russian business might suffer losses of up to $8bn because of the events in Ukraine. However, this may well be a significant underestimate given that President Vladimir Putin himself back in late November pegged Ukraine’s total debt to Russia at more than $30bn, including loans from Sberbank, Gazprombank, VEB and VTB. These concerns are likely to be exacerbated by US secretary of state John Kerry’s comments to CBS’s Face the Nation (he noted that President Putin “may find himself with asset freezes on Russian business. American business may pull back, there may be a further tumble of the RUB”). At present the MICEX is down 8.16%.
And on Russian FX reserves
Russia still has close to $500bn of reserves with which to fight currency weakness should it so wish. However, it will be mindful of the heavy hit its reserves took in 2008 as it sought with some difficulty to defend the RUB between August and December. It may well therefore consider discretion to be the better part of valour. It may also be interesting to see whether this alters the central bank’s drive towards achieving a free-floating currency by 2014. For now the main move by the central bank has been to raise key lending rates by 150 bp. Nevertheless USD/RUB is still up over 1% on the day.
Philip Stafford, who runs the FT’s Trading Room, reports that the Moscow Exchange has put out some guidelines for traders this morning. It goes right the way to suspending trading for the rest of the day if the market moves – ie falls – 25%. But the most relevant bits (for now) are:
To cope with the market volatility, the Moscow Exchange has raised the margin requirements for trading in a host of Russian securities including Gazprom, Norilsk Nickel, Lukoil, Rosneft and Sberbank.
If the value of indices moved by more than 15 per cent, trading on the securities market would be suspended, it added. Margin requirements for trading on the foreign exchange market are unchanged.
FT reporter Madison Marriage has digested a Commerzbank commentary on Ukraine, where Simon Quijano-Evans, an analyst at the German lender has called for an IMF-led support programme of $30-35bn to help the Ukraine continue to finance external debt payments.
IMF support, coupled with government reforms, would prevent a loss of confidence that could have a knock on effect on exposed European banks, Quijano-Evans .
He also warned that the current crisis could spill over and affect Ukraine’s $100bn of private sector external debt.
Although Ukraine’s $17.8bn of foreign exchange reserves can cover official external debt payments of $6.5bn this year and the $6.5bn of current account deficit financing, Quijano-Evans warned that additional foreign support is necessary to ensure that external debt payments are covered in 2014 and 2015.
Kathrin Hille, the FT’s Moscow bureau chief, reports that Russia is investigating Dmytro Yarosh, the leader of the far-right Ukrainian group Right Sector, for alleged public calls for terrorist and extremist activities. Moscow’s Investigative Committee said on Monday it had opened a criminal case in absentia against Mr Yarosh.
Right Sector played a key role in the breakdown of the EU-mediated agreement between then Ukrainian president Viktor Yanukovich and opposition leaders on 21 February. Moscow refuses to acknowledge the new Ukrainian government formed after that breakdown as legitimate, and has partly justified its military intervention in Crimea with claims that Russians in Ukraine are at risk under the new authorities.
Roman Olearchyk, the FT’s Ukraine correspondent, adds some context to the Yarosh investigation:
Rabbi Shmuel Kaminezki, spiritual leader of the Jewish community in Ukraine’s industrial city Dnipropetrovsk, said the Right Sector group — and Ukraine’s broader protest movement that toppled Viktor Yanukovich — are not the facist and extremist radicals that Russia makes them out to be.
“They are patriots,” the Rabbi said. “When one of our Synagogues in Zaporizhia was hit by a Molotov Cocktail by provocatuers, Pravy Sector came to help and stood outside to protect the synagogue.”
Danske Bank has issued a note on the Russian financial markets:
In our view, Bank Rossii’s hike is unlikely to do very much to curb the sell-off in RUB. On the contrary, we believe it is likely to add to the panic on rouble markets.
Furthermore, if held for a long period of time, it is likely to dent Russian growth.
Given downside risks for fixed investment growth and potential economic sanctions by western nations on Russia, this monetary tightening could send Russia into recession already in 2014. However, we do not exclude the possibility that Bank Rossii may return to lower rates very soon – even on 14 March 2014 – depending on how geopolitical risks move rouble markets over the next 10 days.
Ben Judah, author of Fragile Empire: How Russia Fell In And Out Of Love With Vladimir Putin, has written on Politico why Russia no longer fears the west.
The Kremlin thinks it knows Europe’s dirty secret now. The Kremlin thinks it has the European establishment down to a tee. The grim men who run Putin’s Russia see them like latter-day Soviet politicians. Back in the 1980s, the USSR talked about international Marxism but no longer believed it. Brussels today, Russia believes, talks about human rights but no longer believes in it. Europe is really run by an elite with the morality of the hedge fund: Make money at all costs and move it offshore.
Jeevan Vasegar, FT Berlin correspondent, reports that Andreas Schockenhoff, parliamentary foreign affairs spokesman for Angela Merkel’s Christian Democrats, warned against sanctions on Russia in an interview published on Monday.
He told Die Welt newspaper: “One must avoid an escalation now. We shouldn’t shoot from the hip with the threat of sanctions.”
Mr Schockenhoff, who was the German government’s coordinator for relations with Russia until January this year, said Moscow should be warned that a violation of Ukraine’s territorial integrity was unacceptable.
A German government spokesman said that Ms Merkel had spoken by phone with both President Barack Obama and President Vladimir Putin on Sunday evening.
The spokesman said that Putin had accepted the German chancellor’s proposal to establish a fact-finding mission and create a contact group, to begin a political dialogue.
The government statements relating to the two phone calls made no reference to sanctions. Germany’s caution over sanctions reflects the two countries’ close economic ties. Germany is Russia’s third most important trading partner, with an 8.7 per cent share in Russia’s foreign trade.
Ed Conway of Sky has just tweeted:
Mark Galeotti, clinical professor of global affairs at New York University’s Center for Global Affairs, has titled a blog post on the crisis: Putin’s Pyrrhic Crimea Campaign. He writes:
The scale and paint-scorching vitriol of Russian media and government rhetoric, the rentamob “defend the Crimea” marches, all this pushes the Kremlin into a position harder from which to withdraw. It has also radicalised Kyiv’s position–Ukraine has understandably mobilised as both political gesture and also practical precaution–and granted it sanctity in Western eyes. After all, let’s not forget that until very recently, while no one in the West mourned Yanukovich’s departure, there were also concerns about the political stability of the new regime, its links with right-wing extremists, the constitutionality of the deposition of the president, etc. Now, to acknowledge any of those would be tantamount to giving comfort to Moscow.
Common sense dictates that this is just an especially muscular and egregious case of Russian sabre-rattling, that ultimately they want Kyiv to cut some kind of a deal (and they’d accept something short of complete submission), and that taking Crimea would actually not be in Moscow’s interests. As the language toughens and the troops roll, though, it’s getting harder to believe that common sense is going to prevail in the Kremlin.
More from Roman Olearchyk on the Russian investigation of Right Sector (see 9.09am):
“There was no appeal by Dmytro Yarosh to Mr Umarov of this sort,” said Artem Skoropadsky, himself a Russian citizen and spokesperson for the Right Sector group. “Someone hacked into our Vkontakte site … we didn’t have control over it for two days. This is nothing more than a part of Russia’s massive and dirty smear camapaign to justify its invasion of Ukraine.”
Former deputy governor of Russia’s central bank Sergey Aleksashenko has tweeeted:
“The fall in markets is a vote of no confidence in Putin. Russian business and people are voting against crazy authorities in extraordinary election”
Military personnel, believed to be Russian servicemen, stand guard, with Ukrainian servicemen seen behind the gate, outside the territory of a Ukrainian military unit in the village of Perevalnoye outside Simferopol, the capital of Crimea (Reuters)
Roman Olearchyk, FT Ukraine correspondent, reports that one day after Ukraine’s naval commander Denis Berezovsky pledged allegiance to Crimea’s separatist leadership, the country’s government, in a statement, assured citizens that the rest of the military personnel in Crimea remained loyal:
“Despite constant pressure from the side of Russian soldiers and radical elements, Ukraine’s military personnel stationed in Crimea are demonstrating unbroken spirit and loyalty to the oath that they gave.
“The Russian Federation is continuing to wage an information war against Ukraine with the aim of justifying its illegal actions on the territory of a sovereign state.”
Speaking on Ukrainian television, army officials accused Russian troops and separatists of seizing and surrounding various Ukrainian military bases and assets in Crimea.
Media reports alleged Russian troops had as of Monday morning taken over a ferry terminal on Crimea’s easternmost tip. They also reportedly surrounded Ukrainian military jets at Belbek airport near Sevastopol, the Perevalny base where some 1,000 Ukrainian troops were stationed. Ukrainian officials said. Russian troops and militant separatists also tried to seize the country’s naval command center in Sevastopol. Telecommunications were cut off at many Ukainian military sites, according to reports.
With Ukrainian soldiers given orders to avoid provocations and not shoot back, no military clashes were reported by either side.
Russian news agency Itar-Tass is reporting that more than 3,500 servicemen and 450 “units of military hardware” of the Russian Baltic Fleet are taking part in tactical exercise of coast guard troops on a test-site in the Kaliningrad region on Russia’s Baltic coast in the framework of a surprise inspection of combat readiness of troops and ammunition of the Western and Central Military District.
The agency reports adds:
The coast guard troops which had marched many kilometers from places where they are permanently stationed have practiced defense and offensive operations to improve their skills in handling conventional armaments and hardware, maneuvering on a battle field and in the construction of fortifications. During the tactic exercise the troops have complied with the assigned norms in shooting, tactical , engineering and special training under conditions which maximally resembled a battle field,
Toppled Ukrainian president Viktor Yanukovich now has a wanted profile on the interior ministry’s website:
Sam Jones, the FT’s defence and security editor, has more on the Russian exercises in the Baltic:
The manoeuvres taking place off Kaliningrad today – the emergency inspections for combat readiness – are part of a huge emergency war gaming exercise the Kremlin announced last week. The government has denied they have anything to do with the situation in Crimea but few military experts are in any doubt that they are at least in part related.
Crucially the exercises have allowed Russia to shift troops around without anybody knowing exactly where they are. For example, a whole division of crack paratroopers – the 76th of the VDV – have left their base in Pskov in the north, I’ve been told. It’s not yet clear where these troops have ended up, though some are speculating they are among those being flown into Belbek airport near Sevastopol. The 76th was deployed in Georgia in 2008.
Ukraine’s State Border Guard Service on Monday issued this statement to break down the chronology of alleged Russian interventions in Crimea.
The chronology of irregular actions on the part of Russian Federation in the Autonomous Republic of Crimea. In recent days numerous cases of Russian Federation Armed Forces units arrival with violation of international rules and agreements.
- For instance, on February 28, at 8.45 a.m. the flight of more than 10 military helicopters has been monitored by the technical observation post located on the cape of Takil from the direction of Russian Federation to Ukraine.
Three helicopters (two KA-27 and one Mi-8) landed at the Kacha airport and passed through the border and customs established procedures according to the preliminary made application. The rest of helicopters came down near the airport, herewith, there were no answer received on the border detail chief’s appeal concerning the necessity of passing the established formalities by these helicopters, which arrived without preliminary made application with violation of relevant agreement.
The chief of the border detail of the State Border Guard Service of Ukraine made a statement of Ukrainian border violation by aforementioned helicopters.
- On February 28, eight military troop-carrying aircrafts IL-76 of Russian Federation Armed Forces arrived at the airfield “Gvardiyskyi”. Application according the arrival of these aircrafts has not been received from Russian Federation.
Garrison commander of airfield “Gvardiyskyi” denied border control performing to border detail and denounced that they had no need for services of the State Border Guard Service of Ukraine and the planes are to land every 15 minutes.
- On March 1, Russian Federation Council unanimously adopted the proposal of Russian President Vladimir Putin to bring troops into Ukraine.
- On March 1, at 9.10 p.m. two large landing ships “Kaliningrad” and “Minsk” of the Baltic fleet arrived at the port of Sevastopol.
- On March 2, large landing ships “Olenihorskyy Gorniak” of Northern Fleet and “George Victorious” of Baltic fleet arrived at Sevastopol.
The call of military ships was made with violation of Article 30 of United Nations Convention on the Law of the Sea and Sections 14 and 15 of Rules on navigation and stay of foreign warships in the territorial sea, internal waters, on roads and at ports of Ukraine, approved by the Decree of the Cabinet of Ministers of Ukraine № 529 dated May 6, 1996.
Kathrin Hille reports from Moscow that Russia has said it would come up with concrete proposals for aid to Crimea by Monday night.
“We have held consultations, we will submit concrete proposal by the end of the day,” finance minister Anton Siluanov said at a meeting with prime minister Dmitry Medvedev.
The announcement by President Vladimir Putin last Friday that Russia was considering aid to Crimea was one of the first signs that Moscow was supporting the region against the central Ukrainian government.
Ukraine’s Prime Minister Arseniy Yatseniuk warned Russia on Monday that his country will not surrender control over the Crimean peninsula.
“Crimea will not be given to anyone,” he told journalists.“There are no grounds to use force against Ukrainians and peaceful citizens” and no justification “for the deployment of Russian’s military contingent.”
Mr Yatseniuk’s words come amid growing signs that thousands of Russian troops and separatists militants have increased their grip over the autonomous republic and one day after Ukraine’s naval commander Denis Berezovsky pledged allegiance to Crimea’s separatist leadership.
A military personnel member, believed to be a Russian serviceman, stands guard on a military vehicle outside a Ukrainian military unit in the village of Perevalnoye, near Simferopol (Reuters).
FT Ukraine correspondent Roman Olearchyk reports that Ukraine’s sovereign debt insurance costs soared on Monday, with five-year credit default swaps rising 169 basis points from Friday’s close to 1,201 bps.
As concerns mounted that the cash-strapped country could find itself struggling to cover external obligations if pulled into a war with Russia, a leading Kiev-based investment bank called on the international business community to intervene.
“Today, the territorial integrity and sovereign future of Ukraine is under serious threat, and we are seeking your help,” Igor Mazepa, CEO of Concorde Capital said in a statement.
“We ask that you use all the means at your disposal to promote a peaceful resolution to the conflict between Ukraine and Russia. Despite assurances from Russia that it is not interfering in Ukraine’s internal affairs, we observe that Russian armed forces continue to engage in active and illegal military maneuvres on the territory of Ukraine. Local administrative buildings and airports in Crimea have been seized. Armed units are also attacking Ukrainian military forces, which are showing considerable restraint while awaiting a negotiated, peaceful settlement,” he added.
More from Peter Spiegel, FT Brussels Bureau chief:
Even as diplomats work on the geopolitics of Russia’s move into Crimea, the International Monetary Fund and the EU are still working to provide Ukraine with much-needed financial aid. Ukrainians have told the EU that they need $4bn in short order, but it remains unclear if the international community can move that quickly.
Speaking this morning in Berlin, José Manuel Barroso said that the EU and the IMF were working to come up with a package of urgent aid:
“We are now preparing a package of support to Ukraine. We are working with the IMF, and myself and the European Commission are preparing some options for supporting Ukraine. As we said, we keep our willingness to offer Ukraine the political association and economic integration through the association agreement, and also the free trade agreement. But there are some difficulties in that country to which we have to respond through emergency measures. So this is the point. To work in the economic field, as a matter of urgency, trying to articulate with our partners internationally to support that country but also politically to do everything that we can, to avoid the escalation, to avoid the lack of respect for the sovereignty of Ukraine. And I believe this is shared by all European countries, we will see this today when they meet at Foreign Affairs Ministerial level.”
Barroso also confirmed what was being buzzed about in Brussels diplomatic circles on Sunday: there is likely to be a special emergency EU summit to deal with Ukriane:
“We are, of course, working with all our Member States to have a common, a firm response to those developments. Today, there will be a foreign affairs [ministers' meeting] and, very soon, the heads of states and government of the European Union will also meet to have a common response.”
Kathrin Hille reports from Moscow that Russia is setting up a state company tasked with building a bridge across the Kerch Strait between the Eastern end of Crimea and Russian territory.
Prime Minister Dmitry Medvedev said he had signed a decree ordering the establishment of the company. The announcement came amid reports that Russian troops had taken over the ferry terminal at Kerch, the Crimean city from which ships to Russia depart.
Mr Medvedev said the bridge plan was based on an earlier bilateral agreement with Ukraine to look into a new link between the peninsula and Russia. He said the agreement was binding.
Moscow’s step to move ahead on the project is likely to be seen as a further step in tying Crimea closer to Russia as it comes amid a de-facto Russian occupation. In contrast to the Kerch project, Russia has said that it will suspend most economic cooperation agreed under its December bailout package for the neighbouring country. The Russian government has also refused to engage in any interaction with the new government in Kiev.
Markets update from Andrew Bolger, FT markets correspondent:
European markets followed Asian investors in responding to the escalating tensions in Ukraine by marking down equities and seeking havens in commodities and gold.
After falls in Asia, London’s FTSE 100 opened 93 points lower at 6,715.73, a drop of 1.38 per cent, while Germany’s DAX shed 237 points to 9,453.12, down 2.44 per cent. The mood remained nervous and by mid-morning the FTSE 100 was down 1.42 per cent, though the Dax’s decline had reduced slightly to 2.29 per cent.
Commodities advanced to their highest levels in almost six months as the stand-off fuelled fears that energy and agricultural supplies could be disrupted.
Brent crude oil rose to a 2014 high of $111.33 a barrel. Corn and wheat prices jumped and the price of gold also rose, climbing 2.1 per cent to $1,349.30 an ounce, its highest level since October.
And here is an FT article on companies that are suffering as a result of their exposure to Russia and Ukraine.
Austria’s Raiffeisen Bank, steelmaker Evraz and brewer Carlsberg have all seen their share prices fall sharply.
Further to the Concorde Capital statement (see 11.07am), Roman Olearchyk reports that the statement was signed by several other Ukrainian institutions.
Igor Mazepa, CEO, Concorde Capital
Vladimir Bychnik, CEO ART Capital
Dmytro Boyarchuk, Executive Director CASE Ukraine
Dmytro Tarabakin, Managing Director, Dragon Capital
Yuriy Yakovenko, CEO, Eavex Capital
Igor Burakovsky, Head of the Board, Institute for Economic Research and Policy Consulting
Nick Piazza, CEO, SP Advisors
And here are the highlights (FT bold):
Appeal to the International Investment Community on the Situation in Ukraine
We, the representatives of Ukraine’s major investment banks and economic think tanks, have always refrained from engaging in political statements while serving the needs of our foreign clients. We have aimed to remain professional and provide unbiased coverage of events in Ukraine, and we are grateful to our clients and partners for many years of positive cooperation.
Today, the territorial integrity and sovereign future of Ukraine is under serious threat, and we are seeking your help. We ask that you use all the means at your disposal to promote a peaceful resolution to the conflict between Ukraine and Russia. Despite assurances from Russia that it is not interfering in Ukraine’s internal affairs, we observe that Russian armed forces continue to engage in active and illegal military maneuvers on the territory of Ukraine. Local administrative buildings and airports in Crimea have been seized. Armed units are also attacking Ukrainian military forces, which are showing considerable restraint while awaiting a negotiated, peaceful settlement.
We refute the Kremlin’s aggressive statements in recent days regarding the “extraordinary” situation in Ukraine and the “threat to the lives of Russian citizens”, which, according to Vladimir Putin, form the basis for the invasion of Russian troops onto the territory of a sovereign state until a “normalization of the social and political situation.”
And this is what they “underscore”:
• The situation in Ukraine is no longer extraordinary. The domestic political conflict has been resolved, presidential elections have been scheduled, and a new government has been appointed.
• The new government of Ukraine is entirely legitimate. 328 members of Parliament – 73% of all MPs and above the 300-vote constitutional super-majority threshold – voted to remove ex-President Viktor Yanukovich from office. A total of 371 Members of Parliament (82% of all MPs) voted to approve Arseniy Yatseniuk as Ukraine’s new Prime Minister. EU member states, the United States and Canada have all recognized the legitimacy of the new government.
• In order to avoid an all-out military conflict and the loss of human lives, the Ukrainian authorities have purposely refrained from engaging in military action in Crimea. This exposes the Russian fabrication that its citizens residing in Ukraine are in danger. Despite Russia’s full-fledged military intervention, Ukraine has not blocked international borders and people are free to travel to and from Russia.
• On the basis of the above points, the threat to the lives of Russian citizens and citizens of other countries stems solely from the presence and actions of Russian military units currently located on the sovereign territory of Ukraine. We believe that a “normalization of the social and political situation” in Ukraine is not possible while Russia continues to interfere, in Ukraine’s internal affairs.
We appeal to western governments, including the US and the UK, guarantors of Ukraine’s territorial integrity under the Budapest Memorandum of 1994, to exercise diplomatic and economic pressure on Russia.
Christian Oliver reports from Brussels that EU foreign ministers are arriving in Brussels and all eyes will be on whether they issue a threat of EU sanctions against Russia.
Eastern European nations favour a strong statement with a warning to Moscow of “costs”, “consequences” and even “sanctions”. The* UK says that Russia should be aware of potential costs* and Ireland has warned that sanctions are an option. Italy and Germany are seeking a milder line.
The International Monetary Fund has announced Monday that it is sending a mission to Kiev on Tuesday to hold talks with government officials who are seeking a multibillion-dollar bailout.
A team from the European Commission’s economic directorate, which is charge of the EU’s end of the macro-financial aid programme, is already in Kiev for similar talks.
James Fontanella-Khan, another FT correspondent in Brussels, reports that at the EU’s emergency foreign affairs council in Brussels Sweden’s hawkish foreign minister said that a political solution to the Crimean crisis would be impossible unless Russia ended the illegal occupation of the Ukrainian peninsula.
“Of course we will seek a political solution but that will have to be based on the withdrawal of Russian forces and of course taking back the threat of invasion of Ukraine as a whole,” Carl Bildt said on his way into the emergency meeting.
“It is very difficult to see that there can be a political solution without the withdrawal of the Russian forces from their illegal actions on the territory of an independent European country.
Mr Bildt added that he “was not very optimistic” about the EU coming up with an immediate solution to the crisis but he remained hopeful that Moscow would cave in to growing international pressure in the long run.
“Some in Russia are still impressed by their military might but I think that after a while they will see the limitation,” said Mr Bildt.
“Military might is not the way to make friends in Europe… I think that at some point in time they will start to see that. I don’t think it will happen today, I don’t think it will happen tomorrow, or perhaps not even the day after tomorrow but it will happen (at some point).”
A unit claiming to be made up of Cossack and other pro-Russian citizen volunteers take up position outside a Ukrainian military base in Crimea where heavily-armed unidentified soldiers have surrounded Ukrainian soldiers inside (Getty)
More from Sam Jones, the FT’s security and defence editor, on the state of the Ukrainian navy in the Black Sea:
Reports are coming out of Sevastopol that Ukrainian sailors have refused to join the Ukrainian navy’s (former) commander-in-chief rear admiral Denis Berezovsky in defecting. Berezovsky was stripped of his commission and accused of treachery by Kiev over the weekend after he said he was siding with the Russians.
The sailors’ loyalty is mostly symbolic, however: the Ukrainian navy, based in Sevastopol’s Streletskaya bay, is tiny compared to the Russian Black Sea fleet (based in the Karantinnaya and main Sevastopol bays next door). Ukraine has just 1 small frigate – the Hetman Sagaidachny – which has just returned from a mission in the gulf and 1 aged submarine in bad need of repair. Besides those there are just 10 corvettes, which are really nothing more than coastal patrol vessels.
Of course, had the sailors joined their former admiral, it would have been quite a coup for Moscow. So far Russian media outlets have made a huge deal of Crimean locals and some security forces welcoming and siding with them.
Radoslaw Sikorski, Polish foreign minister, has just given his view on how serious the crisis is:
“We have the most serious crisis in Europe since the wars of Yugoslav secession. The credibility of the international community, and the EU in particular, is at stake.”
Roman Olearchyk, our correspondent in Kiev reports that as the Russian intervention puts additional pressure on Ukraine’s already stretched state finances and crumbling economy, the International Monetary Fund is sending a mission to Kiev for talks on Tuesday with government officials who are seeking a multi-billion-dollar bailout.
Arseniy Yatseniuk, Ukraine’s prime minister, said: “This government will meet any IMF conditions,” including greater exchange rate flexibility and removing unsustainable subsidies on household utility consumption “for a simple reason … we don’t have any other options”.
Stephanie Flanders, chief market strategist for UK and Europe, JPMorgan Asset Management has written that there might be some bargains to be snapped up amid the carnage of the Russian stock market rout.
“Events in Ukraine have clearly pushed investors into “risk-off” mode, especially when it comes to emerging market assets. Aside from this short-term volatility, we would still say the direct economic and financial fallout from Ukraine itself was fairly limited – though markets are perhaps not focused enough on the broader contagion that could follow a messy Ukrainian sovereign default.
“However, Russia’s involvement clearly magnifies the scope for contagion and increases the possibility that global energy prices will be affected both directly and indirectly, because of Russia’s previous negotiating role in the Middle East.
“We have been saying for some time that emerging market assets look cheap, and Russia’s looked cheaper than most. At these prices, you don’t have to take a very optimistic view of Russia’s future to see some potential bargains.”
David Liddington, the British foreign office minister at the EU meeting on Ukraine, says London is ruling out nothing, when it comes to potential action – despite other ministers saying military action is not an option:
“I don’t want at this stage before the meeting to rule anything in or rule anything out, but I’m sure we’ll be having a serious discussion amongst colleagues at how to take this further forward in light of what the Russian government chooses to do.
“And I’m sure to we’ll want to discuss how to send a very clear message of support through technical and economic assistance to the government of Ukraine.”
Meanwhile in Kiev:
A pro-government protester in Independence Square salutes during the playing of the Ukraine national anthem (AP)
This from our markets team:
The crisis in Ukraine saw European gas prices rise sharply on Monday.
British day-ahead natural gas prices rose more than 7 per cent to 60.50p per therm, while Dutch prices climbed 6.7 per cent to €24.48.
Russia is one of the world’s biggest gas producers and send almost half its supplies to the European Union, some of it through Ukraine.
After the market falls in Asia, London’s FTSE 100 had by early afternoon shed 1.65 per cent to 6,698, while Germany’s DAX was 2.88 per cent down at 9,412. S&P 500 futures were pointing to a 0.8 per cent drop at the open of trading in New York, after the benchmark US index finished last month at a record high.
Update from Christian Oliver monitoring the EU foreign ministers meeting in Brussels:
“Ministers are edging towards a statement that issues a threat of “targeted measures” against Moscow if there is no political solution. There is a clear divide between eastern European nations gunning for an embargo threat today and western Europeans who want to downplay the threat of sanctions and simply issue a condemnation. Some wording on an arms embargo is still possible.
Eastern European diplomats here fear that the most likely Russian gameplan is to topple “fascist” government in Kiev and then send “peacekeepers” more widely in the country. Busloads of Russian protesters all part of this gameplan.
There’s some eastern European opposition to the IMF too, particularly on cutting subsidies which will drive people straight into Russia’s embrace, they say.
Jan Cienski, another FT reporter in Ukraine, says the Ukrainian press has confirmed that about 100 pro-Russian activists have stormed the regional government building in Donetsk, home town of former president Viktor Yanukovich, seizing the bottom two floors of the 11-storey building. The protests broke up a meeting of the regional assembly, which was supposed to approve a new regional governor, Sergei Taruta.
Mr Taruta is one of the oligarchs co-opted to rule regions of eastern Ukraine as a way of solidifying support for the new government in Kiev in largely Russian-speaking region.
Roman Olearchyk reports from Kiev that Oleh Slobodyan, a spokesperson for Ukraine’s border service, said border guards in Crimea were given an ultimatum to pledge allegiance to the peninsula’s Russia-backed separatist leadership “by 6pm Kiev time [4pm GMT], or leave.”
Here’s an FT graphic on the troops Russia can mobilise against Ukraine and the size of the military forces at Kiev’s disposal.
Kathrin Hille reports from Moscow that the foreign ministry is very unhappy at recent comments by US Secretary of State John Kerry.
“We consider unacceptable the threats to Russia which Secretary of State John Kerry has made in a series of public statements in response to recent events in Ukraine and Crimea.”
The ministry said Mr Kerry was not bothering to try and understand the complex processes taking place in Ukrainian society and objectively assess the situation.
“The Secretary of state operates with the clichés of the Cold War, suggesting to ‘punish’ not those who organised the coup but the Russian Federation.”
US ambassador to Ukraine Geoffrey Pyatt is responding to the Russian foreign ministry by retweeting some of John Kerry’s tweets from yesterday.
More from Kathrin Hille on the Russian foreign ministry statement:
Moscow denounced as “baseless” the decision of all seven other G8 member states to suspend participation in the preparatory work for the group’s next summit which is scheduled to be hosted by Russia. The foreign ministry said the move was politically wrong and would harm the entire international community.
However, in an apparently more conciliatory note, it added:
“We hope that instead of the politicised approaches now prevailing in some capitals, the willingness to be guided by common interests and to continue to work constructively together in the “Group of Eight” will still come to the fore. The Russian side is ready for this.”
Swedish foreign minister Carl Bildt tweets that not everyone in Russia is supporting Putin’s Crimea deployment
FT Brussels bureau chief Peter Spiegel has written on the US/EU diplomatic strategy:
The short-term diplomatic strategy adopted by the US and its European allies towards Russia can be summed up by two phrases uttered repeatedly by diplomats in private over the last 24 hours: “de-escalate” and “off-ramp”.
In a trenchant column titled Russia’s invasion marks Vladimir Putin’s failure, Philip Stephens argues that vanity has always trumped strategic logic in the president’s foreign policy:
No one in the west should welcome a long confrontation with Russia. But a demonstration of resolve is the only way to avoid it.
And he says it’s clear who has to stand up and be counted:
The first responsibility falls on Barack Obama. Too often the US president has talked tough only to recoil from hard decisions. This one he cannot afford to duck. But Europe too cannot avoid its responsibilities and break with a record that has seen Mr Putin divide and rule within the EU.
Roman Olearchyk reports that Andrii Deshchytsia, Ukraine’s foreign minister, hinted that his country could launch litigation against Russia, or perhaps its leadership, in an international arbitration court.
“We don’t want to fight with the Russian people and we don’t want to sue the Russian nation, but as for the Russian leadership, that’s a different issue,” he told journalists at a Monday briefing when asked if Kiev was mulling a lawsuit against Russia.
Lucy Hornby, FT reporter in Beijing, reports that the Ukraine crisis has also thrown into confusion China’s recent embrace of Ukraine as a promising new source of grain imports, after recognizing that its own land is insufficient to feed its increasingly wealthy population.
Chinese policy banks and agribusiness have pledged about $10bn in recent years to upgrade Ukrainian ports and irrigation infrastructure, in return for corn, sunflower seed and pork exports.
The Chinese embassy in Kiev last week denied an article in the Russian press, that Export-Import Bank of China had sought international arbitration in a dispute with a Ukrainian state-owned grains trader. The report alleged that the State Food and Grain Corp of Ukraine had taken out $3bn in grains-backed loans from Exim Bank, but then shipped the grain to higher-priced markets elsewhere.
“China is willing to develop the trade relations with Ukraine. We hope Ukraine can keep its China policies consistent and make sure the signed pacts and documents will be carried out effectively,” China’s foreign ministry said in response to queries about the deal.
Claire Jones, the FT’s European economy correspondent, reports that ECB president Mario Draghi has warned the turmoil in Ukraine could knock the eurozone’s economy.
The ECB president told the European Parliament’s Committee on Economic and Monetary Affairs on Monday that, while the direct trade and financial links between the currency bloc and Ukraine were small, the geopolitical dimensions of the tensions “could have a strength that may go beyond the statistical numbers that I’ve just given to you a moment ago”.
“It is not only monetary policy but also a broader issue that may have an [impact] on the broader economy as well,” Mr Draghi said.
From Reuters: The Russian stock market closes down 12.0 per cent at 1115.06
As per our 1.53pm entry…
A woman draws a dove on a sheet bearing wishes for peace at the Independence square in central Kiev (AFP/Getty)
Here’s an FT graphic on the prevalence of Russian speakers across Ukraine
The FT’s Brussels blog has more on the EU ministers’ draft communiqué – taking a look at what had not been agreed ahead of today’s meeting and what it says about the state of the diplomatic initiatives.
Christian Oliver reports form Brussels that the EU foreign ministers have broken off discussion of their statement to discuss reports that the commander of Russia’s Black Sea Fleet, Alexander Vitko, issued an ultimatum for Ukraine’s army and navy personnel in Crimea to surrender by 5am Tuesday (3am GMT) or face military attack.
“If they don’t surrender by 5am tomorrow, a real attack will begin against the armed forces of Ukraine in all of Crimea,” informed sources told the Interfax-Ukraine news agency.
The Black Sea fleet has yet to confirm the ultimatum
The UN Security Council is to meet again today – in public.
Russia’s President Vladimir Putin (centre), accompanied by Russian Defence Minister Sergei Shoigu (left), walks to watch military exercises upon his arrival at Kirillovsky firing ground in Leningrad region (Reuters)
Kathrin Hille reports that Duma speaker Sergey Naryshkin has said there was not yet a need to deploy Russian forces in Ukraine.
“The decision taken by the Federation Council just allows to do that, and this right can be used in case it is necessary, but this need is not there yet,” he said on state television channel Rossiya 24.
In other words the troops already deployed to Crimea don’t really count.
Shares in Gazprom fell as much as 17 per cent today as the Ukraine crisis hit Russian equities. Lex’s Robert Armstrong asks Joseph Cotterill in an FT video what options the state-owned gas producer has if the situation worsens.
The Republican leadership in the US House of Representatives is firmly behind the anti-Russians in Ukraine.
Samuel Greene, director of the King’s Russia Institute at King’s College London, has written an excellent blog on the Ukraine crisis.
“This is not a conflict of the Russian people’s choosing. But the EU and the United States can make it clear that Russia’s elite will not enjoy the reduced transaction costs that come with being a member of the clubs that Moscow has been so eager to join.
“In this regard, calling off Russia’s OECD and IEA accession, suspending strategic EU-Russia talks on visa facilitation and trade, and canceling business delegations would not be merely symbolic gestures. These are the sorts of things to which markets react, in both the short and the long term, and the markets speak a language that Moscow understands well.
“Putin may become popular with nationalists if he can bring them Crimea, but he will quickly become unpopular with his elite if he cannot bring them continued wealth. It is the latter who keep him in power.”
FT political correspondent Kiran Stacey has blogged on how the Ukraine crisis is playing out in UK political circles.
He concludes that the UK has very few unilateral options and is struggling to persuade other EU powers to toughen their stance.
Here’s a Bloomberg screenshot of how the Ukrainian government six-month bond has performed today. Not well, in short.
This chart has been updated with a corrected version
Roman Olearchyk reports from Kiev that Yevhen Komarovsky, a respected eastern Ukraine-based doctor who has a popular TV show giving advice to parents on how to take care of their children’s health, condemned Russia’s military actions and smear campaign against Ukraine in a video address posted online.
“What I see on Russian television [about Ukraine] … there was never such lies in all the days of the Soviet Union,” the Kharkiv native said, referring to a Russian propaganda campaign justifying the need for invasion to protect ethnic Russians who are allegedly being persecuted in the country.
Speaking in his native Russian and condemning protestors who raised the Russian flag on one of the city’s government buildings, he added: “Nobody is killing us … nobody in my Ukraine prevents me from speaking Russian.”
From the US National Security Council, a readout of vice-president Joe Biden’s phone call this morning with Dmitry Medvedev, Russian prime minister:
Russia is denying reports about the ultimatum given by the Russians to Ukrainian troops in Crimea. “This is utter nonsense”, a spokesman for the Russian defence ministry told Vedomosti, a Russian broadsheet.
A spokesman for headquarters of the Russian Black Sea Fleet also told the Russian Interfax news agency the reports were “nonsense”. The spokesman said: “We are getting used to daily reports accusing us of preparing to military action against our Ukrainian colleagues. We will not be pushed towards a head-on confrontation”.
From James Fontanella-Khan, FT correspondent in Brussels: Laurent Fabius, French foreign minister, said that “unless Russia takes concrete measures to de-escalate the situation in Crimea, a whole series of contacts will be cut”.
More specifically, he talked about a suspension of talks on visa liberalisation and the suspension of a series of economic agreements. He did not mention an assets freeze or an arms embargo.
A Ukrainian soldier at the Belbek military base talks with family members, including his daughter, through the gates of the base entrance today in Lubimovka. (Getty)
Why is Crimea so important to Russia? Here’s an in-depth look at the peninsula’s strategic significance and deep-running cultural and historical ties to its larger neighour.
Such ties of history and culture make it difficult for the Russian elite to adjust to the reality of an independent Ukraine. Ukraine is home to an estimated 7.5m ethnic Russians, including an unknown number of Russian passports holders. The Russian authorities are said to have been handing these out to residents of Crimea and other parts of the east for several years – although Russia has denied this.
Herman Van Rompuy, European Council president, tweets that EU leaders will convene on March 6 for an “extraordinary summit” on Ukraine:
James Fontanella-Khan in Brussels highlights the key section of the just released EU statement:
The EU and those Member States who are participants of G8, have decided for the time being to suspend their participation in activities associated with the preparations for the G8 Summit in Sochi in June, until the environment comes back where the G8 is able to have meaningful discussion. In the absence of de-escalating steps by Russia, the EU shall decide about consequences for bilateral relations between the EU and Russia, for instance suspending bilateral talks with Russia on visa matters as well as on the New Agreement, and will consider further targeted measures. The Council decides to remain permanently seized, in order to be in a position to take rapidly all necessary measures.
Roman Olearchyk sends this update from Kiev:
Ukraine’s Defense Ministry said its military forces in Crimea are under “permanent psychological pressure” to surrender to Russian troops backing the peninsula’s separatist leadership.
The “Russian Federation continues to [wage an] information campaign against Ukraine to justify its illegal actions within the sovereign territory,” the ministry said in a statement.
“Through mass media and internet, they spread incorrect information on … captured military units and facilities in Crimea. Despite multiple attempts of Russian servicemen and radical elements to capture, block, force the Ukrainian servicemen to put down arms, under permanent psychological pressure, the Ukrainian servicemen demonstrate allegiance to the oath and the Ukrainian people, courage and confidence in own actions,” the statement adds.
In Washington, US Secretary of State John Kerry – who leaves tonight for Kiev – met with the president of Moldova, reports Richard McGregor, Washington bureau chief. Kerry refrained from speaking about Ukraine directly but said: “I regret that Russia has put pressure on Moldova and their energy and their trade.”
Meanwhile, John Boehner, the Republican speaker of the House, told the Enquirer newspaper in his home state of Ohio that Russian President Vladimir Putin is a “thug”.
“It’s time to stand up to Putin. At what point do you say enough is enough. We are at that point”, Boehner said.
An update on the latest developments:
- Russia has denied reports it issued an ultimatum for Ukraine’s army and navy personnel in Crimea to surrender by 5am Tuesday (3am GMT) or face military attack.
- The EU’s Foreign Affairs Council has put out a statement calling for Russia to withdraw its troops from Crimea and warning that “in the absence of de-escalating steps” it would re-consider bilateral relations and “consider further targeted measures.”
- The EU has called an “extraordinary summit” of presidents and leaders for Thursday to push for de-escalation.
- The UN Security Council is set to hold a public meeting, at Russia’s request, today at 20:30pm GMT.
Following John Kerry’s warning on Sunday that “all options are on the table”, Jennifer Psaki, a US state department spokeswoman, said that the US was “likely” to introduce sanctions on Russia if it tried to retain military control of Crimea and was not just using the threat of sanctions to dissuade Russia from taking military action in eastern Ukraine, reports Geoff Dyer in Washington.
“It is likely that we will put these [sanctions] in place,” she said. “We have a broad range of options available. We are far more forward on this than we even were yesterday.”
Add to the list of corporations that may be fretting over the escalating crisis: CNBC’s Kayla Tausche notes that Citigroup is among the US banks most exposed to the Ukraine crisis, with $600m in assets in Ukraine and $10.3bn in Russia.
David Lidington, Britain’s minister for Europe, said following today’s EU foreign ministers meeting that “the situation on the ground in Ukraine is now very serious indeed, with other reports coming through of fears of intervention by Russia in eastern Ukraine. We obviously hope very much that those reports prove to be unfounded.”
There is now a very narrow window of opportunity available for Russia to de-escalate the situation.
I hope very much that even at this stage the government of Russia will see that it is in nobody’s interests to continue to intervene in Ukraine’s affairs, with her sovereignty and her territorial integrity and that Russia will open direct talks with the Ukrainian government, will withdraw to her legitimate military bases and we can have a mature discussion about any grievances that there might genuinely be.
But in the absence of de-escalation I’m afraid we will not be looking at business as usual and this continued escalation of this crisis is bound to have a serious impact upon relations between EU countries and Russia across a wide range of fields.
Ukrainian billionaire Igor Kolomoisky has weighed in today, reports Roman Olearchyk in Kiev.
Mr Kolomoisky, who this weekend agreed to become governor of his native Dnipropetrovsk region as the country braces a broader Russian invasion into eastern Ukraine, described Russia’s President Vladimir Putin as as a “schizophrenic of short stature” for putting Slavic brothers Russia and Ukraine on the verge of war.
“I don’t understand how Ukrainians and Russians can fight,” he said in an online video.
Speaking for the first time since taking over as Dnipropetrovsk governor, the Ukrainian businessman first took a sharp shot at Viktor Yanukovich, the toppled Ukrainian president, before quickly turning towards Mr Putin.
“I will say it undiplomatically. We had our own big schizophrenic,” he said, referring to Mr Yanukovich, who is of tall stature.
“But there,” he said giggling as he referred to Russia, “is a schizophrenic of short stature.”
“He is completely inadequate. He has completely lost his mind. His messianic drive to recreate the Russian empire of 1913 or the USSR of 1991 could plunge the world into catastrophe,” added Mr Kolomoisky, who is known for his sense of humour.
Nato is the latest international body to announce a meeting – the North Atlantic Council will convene tomorrow, March 4.
The meeting comes at the request of Poland under article IV of the group’s founding treaty, which allows any ally to call a meeting “whenever, in the opinion of any of them, their territorial integrity, political independence or security is threatened.”
Nato said in its announcement:
The developments in and around Ukraine are seen to constitute a threat to neighboring Allied countries and having direct and serious implications for the security and stability of the Euro-Atlantic area.
Ukraine’s defense minister says Ukraine bases in Crimea are surrounded by increased Russian troop presence, Roman Olearchyk reports.
Speaking on Ukrainian television late on Monday, Ihor Teniuk, defence minister, said Russian troops had surrounded “the majority” of Ukrainian military sites in Crimea after having in past days deployed 5,000 extra special forces troops into the peninsula, bringing the total to some 16,000.
Barak Ravid, Haaretz correspondent, snapped this picture of US President Barack Obama meeting Binyamin Netanyahu, Israeli prime minister, in Washington:
Speaking at the White House, Barack Obama, US president, emphasised that Russia has violated international law and Ukrainian sovereignty.
Secretary of State John Kerry will offer a “specific and concrete” aid package to Ukraine when he travels to Kiev, Mr Obama said. He added that the US was “examining a series of steps, economic and diplomatic, that will isolate Russia and have a negative impact on Russia’s economy and its status in the world.”
He warned that “over time this will be a costly proposition for Russia”.
However, Mr Obama reiterated that Vladimir Putin could still defuse the crisis by accepting international monitors, possibly under UN or Organisation for Security and Cooperation authority, to ensure the security of Russian nationals and Russian speakers in Ukraine. “Really there are two paths Russia can take at this point,” he said.
Mr Obama called on Republicans and Democrats in Congress to unite on affirming the principle that no country should invade another unprovoked. The first order of business would be to “work with the administration to provide a package of assistance to Ukraine.”
Sam Jones, the FT’s security and defence editor, sends some context on the significance of the Nato meeting, announced a short while ago:
The invocation of article IV as grounds for a meeting of Nato’s North Atlantic Council is significant in that it has only been done three times in the last 60 years of the alliance’s existence.
It falls far short of the charter’s more famous article V – viz. “The Parties agree that an attack against one or more … is an attack against them all.’”
But it does still carry some weight. In full it reads:
The Parties will consult together whenever, in the opinion of any of them, the territorial integrity, political independence or security of any of the Parties is threatened.
On all three previous occasions Turkey has been the one to invoke article IV – first in 2003 over Iraq and twice in 2012 over the Syrian conflict.
Nato has hitherto been careful to signal that its discussions on Ukraine have not fallen under the article. That has now been reversed at the behest of Poland, which along with Lithuania had earlier indicated its desire to convene an article IV discussion.
The appetite for any sort of military planning or discussion on Ukraine coordinated by Nato nevertheless seems for now to be low-to-non-existent.
A secret document photographed in the hands of a senior official outside Downing Street in London earlier this afternoon, for example, made clear that the UK’s stance is to “discourage any discussion (e.g. at Nato) of contingency military preparations.”
A man waves a Russian flag and a Russian Navy flag in front of the headquarters of the Ukrainian Navy in Sevastopol on Monday. (AFP/Getty)
As US Secretary of State John Kerry prepares to fly to Kiev tonight, Ian Bremmer, Eurasia Group president, has this to say about his predecessor:
On the FT’s beyondbrics blog, Sergei Kuznetsov wonders, should the EU should worry about a gas war?
A previous dispute over gas prices between Russia and Ukraine in 2009 led to cuts in exports to Ukraine, resulting in shortages in the EU. This happened in winter, when consumption was at its peak.
Might a similar crisis erupt again? It certainly could. However, the EU states currently have significant gas stocks, thanks to a mild winter. According to Gas Infrastructure Europe, most central European countries, which rely heavily on Russian gas, had inventories of between 37 and 70 per cent of capacity on Sunday.
Read the whole post here.
James Politi, FT correspondent in Washington, sends an update on reaction from US Democrats:
Harry Reid, the Senate majority leader, threw cold water on any notion that the US should unilaterally impose sanctions on Russia over the crisis in Ukraine, a sign that President Barack Obama’s own Democratic party wants to be quite careful about how it proceeds even in punishing Moscow through trade and economic means.
“The most important thing is for us – the United States – to make sure that we don’t go off without the European community,” Mr Reid told Politico. “We have to work with them. Their interests are really paramount if we are going to do sanctions of some kind. We have to have them on board with us.”
A spokesman for Ron Wyden, chairman of the Senate finance committee, told the FT he would be pressing Jack Lew, Treasury secretary, at a hearing this week on how US trade and investment policy could “serve as a tool to respond to Russia’s aggression”.
Much of the focus at the moment on Capitol Hill appears to be on finding a way to hurt Russia on the banking side through asset freezes and visa denials, which may be relatively easy to sell to Congress.
“Secretary of State John Kerry has suggested actions including asset freezes, visa bans, a disruption in trade, and a slowdown in business investment in Russia. I will support any of these measures pushing Putin to withdraw his troops,” said Tim Ryan, a rank-and-file Democrat from Ohio.
Mr Ryan also called for the US to increase its exports of natural gas to Ukraine and the EU: “Taking this action will allow these countries to diversify these energy sources and reduce their dependence on Russia while also stimulating our economy and providing geo-political leverage over Russia.”
The UN Security Council’s meeting has begun; you can watch it here.
Denis Fitzgerald, a journalist covering the UN, caught a picture of Vitaly Churkin, the Russian ambassador to the UN, a few minutes ago. Russia requested today’s meeting to “explain in more detail” its position on Ukraine.
As Vitaly Churkin, the Russian UN envoy, addresses the security council, Al Jazeera producer Benedict Moran is tweeting some of his points:
Samantha Power, US ambassador to the UN, told the security council that Russia’s position is “without basis in reality”.
Russia’s mobilisation is “a response to an imaginary threat” and there has been no evidence that Russian nationals or Russian speakers in Ukraine are in danger, she said. “There is nothing that justifies Russia’s conduct.”
Mark Lyall Grant, UK ambassador to the UN, is speaking now. He accuses ousted President Viktor Yanukovich of abandoning his country and says Russia has “fabricated” claims to justify intervention. He also notes the economic impact of the crisis, reports Jonathan Rozen, UN corresponded at Inter Press Service:
Next up at the UN Security Council meeting is China, which reaffirms its stance of “noninterference” on internal matters.
However, China also emphasises the important of respecting sovereignty and territorial integrity – although the envoy does not name Russia specifically.
More on exactly what Vitaly Churkin, Russian UN envoy, told the security council a short while ago. The AP reports:
Russia’s UN ambassador says Ukraine’s fugitive President Viktor Yanukovich asked President Vladimir Putin to use Russia’s armed forces “to establish legitimacy, peace, law and order, stability and defending the people of Ukraine.”
Ambassador Vitaly Churkin told the UN Security Council Monday he was authorized to read a statement from Yanukovich – and show members a copy – which says that “as the legitimately elected representative” he believes “Ukraine is on the brink of civil war.”
…Churkin quoted Yanukovich, who fled to Russia, as saying “the life and security and the rights of people particularly in the southeast part in Crimea are being threatened,” and continued: “So under the influence of Western countries there are open acts of terror and violence.”
Kiran Stacey, FT UK political correspondent, reports that the UK government has had to deny putting the interests of London’s financial centre “ahead of attempts to defuse the Ukraine crisis after an official was pictured walking into Number 10 with a document warning the UK should not ‘close London’s financial centre to Russians’.”
London has argued that any sanctions – including asset freezes and travel bans – should be carefully drawn so as not to hit innocent parties. The document said: “The UK should not support for now trade sanctions or close London’s financial centre to Russians.”
This latest development comes as David Cameron’s government is navigating tricky waters:
London has found itself in a difficult position over the situation in Ukraine, caught between the US, which is advocating a hard line against Russian aggression, and western European members, such as Germany, which are urging moderation.
David Cameron spoke to both Angela Merkel, the German chancellor, and François Hollande, the French president, about the situation on Monday night, with an emergency EU summit planned for Thursday.
Downing Street said it will continue to act in “lockstep” with its official partners, while some UK officials have suggested that John Kerry, the US secretary of state, spoke out of turn when going into detail about what sanctions might be levied.
Read the full story here.
Why are Russia’s military forces in Crimea?, Ukraine’s UN envoy, Yuriy Sergeyev, asks Russia at the UN Security Council.
He dismisses the justification that Russia is protecting Russian speakers, saying that is the role of Ukraine’s government – and says that he is himself a Russian speaker and does not need Russia’s support.
Mr Sergeyev says there are 16,000 Russian troops now deployed in Crimea, controlling “crucial” military and government installations. He also accuses Russian forces of conducting operations in Crimea and other parts of Ukraine that are aimed at “discrediting the legitimate authorities” and undermining public opinion.
Ukraine’s troops have refrained from action so far but are on full operational readiness, he says.
He finishes his statement in English and switches to Russian, seeming to directly address Vitaly Churkin, the Russian ambassador.
Russian UN ambassador Vitaly Churkin takes the floor again, complimenting Ukraine’s Yuriy Sergeyev for his linguistic skills.
Speaking quickly, forcefully and at length, he compares what has happened in Kiev to the Bolshevik revolution, and says the new Ukrainian government is illegal. He warns it is on the brink of civil war.
He confirms that 16,000 Russian troops are in Crimea, but says a decision has not been reached on using military force.
And he says Russia is “calling for democracy” – comparing what happened to Viktor Yanukovich to President Barack Obama being impeached in Washington while traveling to California.
Samantha Power, the US ambassador to the UN, retorts at Russia that Viktor Yanukovich was voted out by his own party. She calls on Russia to join other nations on the security council in supporting Ukraine’s territorial integrity.
“Why not support international mediation? Why not support an observer mission?” she asks Vitaly Churkin. “Why not pull back your forces instead of sending more?”
The US state department has posted the full text of UN ambassador Samantha Power‘s remarks to the UN Security Council.
Listening to the representative of Russia, one might think that Moscow had just become the rapid response arm of the Office of the High Commissioner for Human Rights. So many of the assertions made this afternoon by the Russian Federation are without basis in reality.
…Russian military action is not a human rights protection mission. It is a violation of international law and a violation of the sovereignty and territorial integrity of the independent nation of Ukraine, and a breach of Russia’s Helsinki Commitments and its UN obligations.
…Russia has every right to wish that events in Ukraine had turned out differently, but it does not have the right to express that unhappiness by using military force or by trying to convince the world community that up is down and black is white.
…The bottom line is that, for all of the self-serving rhetoric we have heard from Russian officials in recent days, there is nothing that justifies Russian conduct. … What is happening today is a dangerous military intervention in Ukraine. It is an act of aggression. It must stop.
Ed Crooks, energy and industry editor, flags a couple more multinational companies exposed to the unrest in Ukraine:
ExxonMobil is the US oil company with the largest Russian operations, and has been an investor there for 20 years. It operates and has a 30 per cent stake in the Sakhalin 1 offshore oil and gas project in Russia’s far east, which produced 145,000 barrels of crude per day in 2012.
Exxon has also made more progress in Russia than any other western oil group in recent years, signing in 2011 a co-operation agreement with Rosneft, the state-controlled oil champion, that now covers plans for developing tight oil in Siberia, exploration in the Arctic Kara, Chukchi and Laptev seas.
Rosneft also last year took a 30 per cent stake in 20 exploration blocks operated by Exxon in the Gulf of Mexico.
Exxon declined to comment on the situation in Ukraine.
General Electric, the industrial and finance group, is another US company that has been growing fast in Russia. It has annual revenues of more than $1bn in Russia, selling products such as equipment for the oil and gas industry, power generation and aero-engines. It reported 18 per cent growth in saes in Russia for the year to the fourth quarter of 2013.
GE said it was “monitoring the situation closely.”
A young Ukrainian man whose father is a soldier at the Belbek military base checks his mobile phone for news alerts as he and other family members anticipate a possible Russian attack. Many of the soldiers have family that live in apartment blocks just outside the base and about two dozen family members braved the cold, ready to block the road to the base entrance should the Russians appear. (Getty)
Reuters’ man at the UN, Louis Charbonneau, has an update following the security council meeting that recently wrapped up:
The Associated Press has posted video of US President Barack Obama‘s comments on Ukraine from the Oval Office today.
“Obviously, the facts on the ground in Crimea are deeply troubling,” Mr Obama said. “My interest is seeing the Ukrainian people be able to determine their own destiny….And I think the strong condemnation that its received from countries around the world indicates the degree to which Russia is on the wrong side of history on this.”
The FT’s Roman Olearchyk, Jan Cienski and Neil Buckley report on a battle Russia is already waging:
Analysts say Russian officials and media have been engaged in recent days in what appears a co-ordinated media war to justify Russia’s military intervention in Crimea – but based largely on distorted and sometimes false information.
Worryingly, Russian media reports have also appeared to be presenting a narrative to support intervention in mainly Russian-speaking east Ukraine, claiming inhabitants were under threat from what are portrayed as Kiev’s “fascist” new leaders.
From James Politi in Washington, a report that the Office of the US Trade Representative has cut off talks with Russia. The agency, which is responsible for developing and negotiating US trade policy, says:
Due to recent events in Ukraine, we have suspended upcoming bilateral trade and investment engagement with the government of Russia that were part of a move toward deeper commercial and trade ties.
As we near midnight GMT, here’s a summary of where things stand after a long and at times fraught day:
- Russia may have given Ukrainian military forces in Crimea an ultimatum to surrender by 5am (3am GMT). Russia has denied multiple reports, but tensions were rising among soldiers stationed at military bases on the peninsula.
- At the UN in New York, the security council meeting turned into a showdown between Russia and several other nations, including the US and UK, which strongly condemned its incursion on Ukraine’s territorial integrity.
- Moscow’s envoy told UN representatives that ousted Ukrainian President Vicktor Yanukovich requested that Russia use military force in Ukraine.
- Some 16,000 Russian troops have been deployed in Crimea since February 26, according to both the Ukrainian UN ambassador. Russia and Ukraine disagreed how many are legally permitted by treaty to be there.
- US President Barack Obama said Russia is “on the wrong side of history” and called the situation in Crimea “deeply troubling”. The US warned that sanctions were “likely” if Russia did not back down.
- But members of Mr Obama’s own Democratic party in the US were cool on this idea, with Harry Reid, Senate majority leader, saying: “The most important thing is for us – the United States – to make sure that we don’t go off without the European community.”
- In the UK, David Cameron’s government denied putting the interests of London’s financial centre “ahead of attempts to defuse the Ukraine crisis”. Mr Cameron is walking a tightrope between the US, which is advocating a hard line against Russian aggression, and western European members, such as Germany, which are urging moderation.
Margaret Brennan of CBS News reports that the Organisation for Security and Co-operation in Europe is sending monitors to Ukraine tonight:
Over on Lex, how Gazprom is in the crosshairs of possibly explosive pipeline politics:
Europe took about 160bn cubic metres of its natural gas from Russia last year. Gazprom pipelines bring this supply, 30 per cent of European demand, across Russia’s borders. Quite a monopoly for any company – except shares in the state-owned producer now trade at a price barely over twice forward earnings. With good reason. Half this gas must cross Ukraine, through the Brotherhood pipeline.
Suddenly, this access is at risk. Both Gazprom and its customers have long tried to proof their gas against instability in Kiev. Still, a Russian invasion of Crimea must take the danger to another level. It has for Gazprom shareholders: the shares fell by up to 17 per cent on Monday.
Read the rest here.
We’re closing the live blog down for now but will continue to post updates on the FT.com homepage. You can follow all of our coverage of the Ukraine crisis here.