Closed Ukraine crisis: Tuesday March 4

The stand-off continues. The ultimatum, reportedly given by Russia to Ukrainian military forces in Crimea to surrender by 5am (3am GMT), passed without incident. Russian President Vladimir Putin has given a press conference in which he stepped back from the brink of confrontation but insisted Viktor Yanukovich was toppled in an “unconstitutional coup”. The US continues to press for full withdrawal of Moscow’s troops from Ukrainian territory. Global equities are trading higher and haven assets retreated as markets reacted with relief to an apparent easing of tensions.

By Shannon Bond, John Aglionby and Amie Tsang with FT correspondents around the world

If you’re still catching up, here’s how things stood at midnight (GMT).

- Russia denied multiple reports that it had given Ukrainian military forces in Crimea an ultimatum, but tensions had been rising among soldiers stationed there.

- 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 Viktor Yanukovich requested that Russia use military force in Ukraine.

- Some 16,000 Russian troops have been deployed in Crimea since February 26, according to 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.

Emoticon Putin has ordered forces engaged in military exercises to go back to their permanent bases, according to the Russian Interfax news agency, which was quoting Dmitry Peskov, the presidential press secretary.

From Patrick McGee, on FastFT: Russia’s stock market climbed 2.5 per cent at the open of trading in Moscow, following gains in Asia.

Reports emerged from Interfax that Russian president Vladimir Putin has ordered troops “engaged in the military exercises” to return to their bases, but the report doesn’t mention Crimea

The Micex index lost 10.8 per cent of its market value on Monday in its worst session in five years. The gain at the open marks its first rise in six sessions.

The Russian rouble is up half a per cent in early trading, at 36.39 per dollar.

Even before the reports, Asian markets were ticking up, too. The Nikkei 225 closed half a percent higher in Japan.

Here’s how the rouble has rallied this morning.

The Kremlin has just clarified that the order from Putin referred just to troops based in Russia. It says in a press release:

“Supreme commander Vladimir Putin gave the order to the troops taking part in military exercises in the west and central military districts to return to their permanent bases. On the previous day the head of state watched the exercises, the final part of which took place in Kirilov in the Leningrad region. Vladimir Putin received a report on the successful completion of the exercises.”

Some broader market news from Andrew Bolger on the FT’s markets desk:

While investors remained cautious as the stand-off continued, some Asian equity markets gained ground.
Japan’s Nikkei 225 average rose 0.5 per cent and the broader Topix climbed 0.6 per cent, ending a four-session losing streak. Hong Kong’s Hang Seng was up 0.4 per cent and in Sydney, Australia’s S&P/ASX 200 rose 0.3 per cent.
The Japanese yen, which investors perceive to be a haven, fell 0.2 per cent from a one-month high to Y101.7 to the US dollar. Gold was down a fraction at $1,350 an ounce, after climbing 1.8 per cent to a four-month high on Monday.
Brent crude oil was flat at $111.21 a barrel, after climbing nearly 2 per cent to a 2014 high on Monday.

Here’s a chart showing how the Russian stock market has performed today

Simon Derrick, chief market strategist at BNY Mellon:

“We think that a cautious stance towards events in the Ukraine remains warranted for the moment. Given this it also follows that the JPY continues to catch our attention. We note that while the latest positioning data from the CFTC show speculative players on the IMM have moderated their short positions since January, they still remain substantial (when looked at in the context of the past decade). While not a perfect picture of how speculative players are positioned, it is still instructive. More particularly, it suggests that a renewed bout of risk aversion could see sustained demand for the JPY start to emerge.

Morgan Stanley put out a note on Ukraine and Russia last night:

Growth at risk:

We see a near-term risk of mild recession in Russia, as a result of the security crisis, higher rates and portfolio outflows hitting consumption and investment, although growth may recover later in the year on higher government spending and lower imports. Meanwhile, Ukraine depends on prompt donor support to avert an economic crisis. We see a limited wider direct impact.

FI strategy view:

We maintain our bearish view on RUB. While rate hikes and more aggressive FX intervention will help, the risk of capital flight and sanctions will keep the pressure on the currency. We expect the UAH NDF curve to remain under stress. In credit, we maintain our neutral stance in Ukraine and Russia and move Russian corporates to neutral from overweight. While negative sentiment has affected CEE, further weakness would prompt us to increase exposure to the region.

Equity view:

Investors are likely to remain wary of Russian equities in the short term. However, today’s sell-off has taken the market to extreme oversold levels, even though the oil price has remained stable. Valuation multiples (3.9x P/E and 0.6x P/BV) have only been cheaper at the depths of the 2008 crisis (when earnings fell by 60%). Despite the hit to growth expectations, any reduction in tension would constitute a buying opportunity.

In Perevalne, Crimea, scores of heavily-armed soldiers not displaying any identifying insignia have taken up positions outside the Ukrainian military base and parked several dozen vehicles, mostly trucks and patrol cars, nearby. Their commander has reportedly told the Ukrainian unit to hand over the base and come out without any weapons, though the Ukrainians have thus far refused.

Kathrin Hille reports more possible fall-out from the breakdown in relations between Russia and the US :

Russia’s Federal Service for Veterinary and Phytosanitary Surveillance said Tuesday it might delay lifting a ban on pork imports from the US. The regulator said that although it had agreed in principle to allow the resumption of imports halted over concerns of contamination with substances such as ractopamine, it now had concerns over the companies providing refrigerated transport.

The date for lifting the ban, originally set for March 10, would be determined only after that controversy was addressed, it said in a statement on its website.

Madison Marriage reports that Credit Suisse analyst Andrew Garthwaite expects the Crimea conflict to have “limited impact on global growth”, with Russia and Ukraine accounting for just 2.9 per cent 0.4 per cent respectively of global GDP.

Germany is likely to be the worst affected developed market, Mr Garthwaite said, as roughly 50 per cent of its oil imports and 39 per cent of its natural gas imports come from Russia.

“Given Russia’s reliance on its energy-related export revenues, it seems unlikely that it would seek to cut off supplies. If there is temporary disruption, then our analysts believe that abnormally high inventories can be run down.

“Even if Russia were to cut off gas exports to Ukraine, the latter would be highly unlikely to cut off European gas supplies, as this would risk jeopardising financial support from the EU.”

Mr Garthwaite also expressed doubts over the likelihood of the oil price rising sharply due to Russia’s dependence on export revenues.

“Russia has much to lose from a possible imposition of trade sanctions – or, even worse, a seizure of Russian overseas assets (worth around $270bn, or 13% of GDP, according to the IMF).”

However, he added:

“We note that if the Ukrainian situation escalates, there is some potential for a spill-over to the conflict in Syria and the west’s relations to Iran, both of which have been backed strongly by Russia over the past couple of years.”

Roman Olearchyk reports from Kiev that acting president and parliament speaker Oleksandr Turchynov, when opening Ukraine’s parliament session on Tuesday morning, urged Russian leaders to “immediately return their forces to their base of dislocation” at the Black Sea Fleet’s base in Sevastopol, and “stop interfering in our internal affairs”.
Turchynov also said that “Ukraine’s General Prosecutor’s Office will appeal to Russia to extradite toppled president Viktor Yanukovich. Handing over Mr Yanukovich, he said, would improve bilateral relations.

Jack Farchy reports that Russia’s finance ministry and Federal Treasury said on Tuesday that purchases of dollars for the country’s reserve fund would be suspended “due to the high level of volatility recently observed in financial markets”.

The reserve fund is a sovereign fund in which Russia holds windfall oil and gas revenues. It converts rouble revenues into dollars in daily operations on the open market conducted through the central bank. According to central bank data, the purchases have amounted to about $100m per day in the past week.
The suspension of the purchases comes as traders said the central bank intervened heavily in the foreign currency market by selling dollars on Monday. BCS, one of Russia’s largest brokers, estimated that the central bank had sold $10.5bn.

The central bank said in a statement it had tweaked its intervention policy to allow it to spend $1.5bn before adjusting the rouble trading range, up from $350m previously.

Roman Olearchyk reports that Ukraine’s parliament has ratified an agreement to accept a €610m loan from the EU, agreed in February 2013 but never ratified under deposed pro-Russian president Viktor Yanukovich.

From the FT’s chief leader writer Jonathan Ford:

There have been lots of rumours that Vladimir Putin is either going to have a press conference, deliver a statement or allow a pre-recorded statement to be broadcast. It appears that a statement is now the most likely. Exact timing is unclear.

FT reporter Jan Cienski has blogged for beyondbrics that the Ukraine crisis is prompting some central and eastern European states to rethink their attitudes to joining the euro.

Jan quotes Poland’s central bank governor Marek Belka as saying:

“This crisis shows that it is worth investing more in the European Union and as well it might be worth it to once again consider Poland joining the eurozone.”

Vladimir Putin has started talking. Kathrin Hille is monitoring him:

There has been an unconstitutional seizure of power. Why has this been done? President Yanukovich, with the mediation of three foreign ministers of European countries in the presence of my representative with the opposition signed … Mr Yanukovich has almost lost all of his powers. He agreed to almost everything the opposition wanted.”

More from Putin:

“We have a revolutionary situation now in Ukraine. Why did this happen? I believe that the root cause lies in the early days of Ukrainian statehood.”


“You need to use only constitutional means.

“Although I don’t encourage regime change in this way, I still understand the demands of the people on the Maidan. They understand that one scoundrel is replaced by another scoundrel.”


“What we see in the East now is that billionaires are being installed as governors. We understand that these people gained their fortunes through loans and shares. One of these oligarchs cheated Roman Abramovich. A. lent him several bn dollars, and he just pocketed the money.”


“Of course the interim president is not legitimate. There is only one legit president. Of course he has no power, but from the legal point of view it’s Mr Yanukovich.”


“There are only three legal ways of removing the president, and those are death, personal resignation, or impeachment.”

Meanwhile Swedish foreign minister Carl Bildt comments on Yanukovich:


“As to the financial aid which could be provided to Crimea. As you know, we took a decision to ask the Russian regions to provide the sources for the aid. The government is now working with the governors of the regions that border Ukraine, and that will be done.”

“As for the use of military use, there is no need for it. But we have that option.”


“As you know, Yanukovich requested that Russia use military force. I’m worried about the nationalists, extremists, anti-semites on the streets of Kiev.”

Putin on the behaviour of the protesters:

“When they seized the building of the party of regions, there was nobody there, only an IT guy. He was shot dead. The second IT guy was brought to the basement and they threw molotov cocktails at him and he was burnt alive.”


“When we see that, we are worried about Russian people, in the east of Ukraine. …. [we need to] protect them …We believe that this is legitimate. We believe that Ukraine is not only our neighbour but our brother nation.

“As for our military forces, they are brothers in arms. “


“That sort of thing is taking place in Crimea. And fortunately no shots have been fired, apart from that one incident in the square …”


“So the tense situation in Crimea related to the possibility of use of force has been exhausted. There is no need for that.”


“As for the military exercises, those were pre-planned.

So what could trigger a use of military force? Of course it would only be an extreme case.

“So we think that we will not be forced to do anything like that in eastern Ukraine.”


“If I were those who consider themselves legitimate authorities, I would hurry to take the necessary steps. Because they don’t have a mandate to carry out the country’s foreign policy, …and Ukraine’s future.”

Putin on the markets:

“This is mostly due to the steps taken by the Fed. Talks about how investors withdrew money from emerging markets. This is the major underlying reason. As for the events in Ukraine, politics always has some impact on the markets.”


“Our telephone conversations (with other leaders) are confidential. Sometimes we even talk on secret lines, and I can’t give you details. Then talks about public statements by western leaders. Then I said well do you think all you did was legitimate? And they said yeah.”

Snap verdict on Putin from FT Brussels bureau chief Peter Spiegel:

Putin says western leaders distorted the meaning of UNSC resolutions – he mentions Libya.

“They make it very clear what their geopolitical and political interests are, and they pursue them in a very determined way. And then they use this phrase, ‘either you’re with us or you’re against us’.

“Our position is very different. Our position is completely legitimate. If we use force, … we have received a request from a legitimate president. Also we have historical and cultural ties with those people. And this is a humanitarian mission. It’s not our goal to conquer somebody.

“If people are being destroyed, killed … I really hope that it will never come to this.”

Putin on sanctions:

“It is those who are going to introduce those sanctions who should think about sanctions. In a modern world where everything is connected, of course you can cause some damage, but such damage will be mutual.”


“What are the motives of our counterparts?

“Actually, even in this situation, we are open to co-operation, I told the government to consider how we can continue to have dialogue/co-operation with those even though we don’t consider them legitimate.”

Question to Putin: “Are you willing to talk to top people in Kiev?”


“They don’t have a president.”

Putin is asked about the Crimean prime minister:

“Of course he is legitimate, they did not violate a single law.”

Putin now talking about the Crimean self-defence forces being formed

Question: Are those in Crimea Russian soldiers?


“Look the uniforms. In many ex-Soviet countries they look similar. You can even go to a store … No, those were not Russian soldiers.”

Putin then claims that Ukrainian opposition fighters were well-trained like special forces.

“Why should self-defence forces in Crimea not be as well-trained?”


“We will never instigate/support such trends. Only people who live in a certain territory have the right to decide their own future.”

Question: Who shot protesters in Kiev? Some people say, actually some of the protesters say, those may have been provocateurs. Who gave those orders?


“I don’t know. Yanukovich told me he never gave those orders. I can tell you more. He called me on the phone and I told him, don’t do that.”

Question: Are you concerned that war will break out?


“No, because we are not going to go to war with the Ukrainian people.

Question: How can Russia help families of Berkut [disbanded Ukrainian elite police unit] officers?


“Yes, this situation concerns us very much. These are not Russian police officers, but out of humanitarian concerns. Maybe Mr Lukin, together with the colleagues from France, Poland, Germany, can go and look at this. They did not do anything wrong, and stood there under gunfire and molotov colleagues.”

Question: The Russian Federation Council suggested recalling ambassador to US?


“Of course [Kerry] is a senior official but he is not a top-ranking official. This would be an extreme measure. I would prefer not to do this. Points to all areas of co-operation and dialogue. It’s easy to destroy and would be difficult to resurrect.”

Putin on Yanukovich:

“I don’t think he has a political future, and I told him that. We only took him out of Ukraine for humanitarian reasons. Death is the simplest way to get rid of a legitimate president and I think they would have just killed him.”

Russian press not being that subservient with Putin, notes Peter Spiegel:


“They just used opposition forces in their aspiration to power. Well there’s nothing wrong with that, but there was violence.

“It’s not the first time the [west] has done this in Ukraine. In US, they sit there across the pond, and sometimes I think they feel like they’re in a lab and performing some experiments on rats.”

Putin on Gazprom:

“Gazprom will not go back to old prices. Gazprom does not want to extend the current price, because the agreement was to review them every three months.”


“I told the govt three days ago to resume [relations] at the government level with their colleagues in government in Ukraine. I gave these orders to the government, and actually Medvedev is working with Yatsenyuk, and Naryshkin is in contact with Turchynov. “

More from Putin on Gazprom and Ukraine:

“They failed to pay off the debt, I think it’s $1.5bn as of today, and if they don’t pay for February it’s going to be $2bn. So if you don’t pay, then let’s go back to regular prices. This makes perfect commercial sense. This has nothing to do with situation in Ukraine. We gave them money, they failed to deliver. So it’s only natural…”

Putin again blames the new Ukrainian govt and west for splitting Ukraine.


“Once legitimate authorities are elected, once a new parliament is elected, [resumption of normal relations] will take place. If I were in their shoes, I’d approve a new constitutional referendum.”

Question: Will Russia recognise the president who will be elected in May?


“It depends. If he’s elected amid the terror that’s going on in Kiev, then we’ll not recognise him.”

Putin on the 1994 Budapest Memorandum:

“Before we go public about something, or doing something in a practical way, we think twice about a poss move and try to think about the consequences and the response of all the poss players. As for the agreement, how do your society assess that conflict? So when we say it’s an unconstitutional overthrow of power, then they say no, it’s not like this. The west says it’s a revolution. It’s hard not to agree with those Russian experts who say a new state could appear. We have not signed any agreements with this new state.”

Putin is asked about buying Ukrainian bonds:

“In principle we would be ready to provide additional funds to buy up more bonds, but our western partners asked us not to do that, they said we need to work together with the IMF to stimulate the Ukrainian govt to pass reforms to improve the economy. That’s the way we’re going to work in the future. But since Naftogaz has not been paying, we are studying other options. We need to send a signal to those who live in southern and eastern Ukraine.”


“I have no idea, to be honest [about poss compromise candidate for Ukrainian president]. After such a crisis it’s very difficult to give any forecast. I don’t welcome this method of overthrowing the legitimate authorities. It doesn’t help to imbue the culture of legitimacy. It could lead to chaos. This is worst thing that could happen to countries with fragile economies. Anyone could come to power, even somebody like Hitler. There were unions in Germany who helped bring him to power. That’s one kind of analogy. One thing I agree with Maidan on: They want change, they want some fresh faces. But there is a threat that someone could come to power who … people with swastika armbands.”

Putin on Tymoshenko:

“We’ve had very successful co-operation with Ukrainian authorities who represented different views.”

He lists different ones, mentions him and Tymoshenko.

“That was kind of constructive work, if she wants to come to Moscow, she’s welcome. But she’s not the head of government, don’t know what her status would be. But we’d not block her from coming here. “

Putin on the militants in Kiev:

“Western instructors have done a good job.”


“None of the previous governments have thought about the needs of the people. In Russia, the average income is 29,700 roubles, in Ukraine it is only some 11,000. Quite a gap. The government should have focused on that. Failure to do that has accumulated over several generations of govt in Kiev, and people want to see change. Yes, you need some new faces, but you need to do it in a constitutional way.”

Putin on Yanukovich again:

“I saw him once after he came to Russia, a couple of days ago, and he was alive and well. He will live longer than the people who circulate those rumours (about him being dead).

Do you sympathise with him?

“No. My feelings are totally different. A person who is head of state has certain rights and certain duties. The first duty is implement the will of the people who elected him there. You have to analyse if he did that. “


“Of course we need to make our position known to all people in Ukraine. We don’t have any enemies there. 3.3m Ukrainians moved to Russia last year.”


“There are also some from western Ukraine. We treat all of them like brothers.

How to help them? If the current govt, if they are really civilised, they should help them.”

Putin has finished his press conference

Summary of Putin press conference:

- He has stepped back from the brink of confrontation but insisted that Viktor Yanukovich was ousted in an unconstitutional coup.

- He said force remained an option but that there was no need for it now.

- He said there are no Russian forces in Crimea, just self-defence units.

- He said Yanukovich was rescued for humanitarian reasons but has no political future.

- Plenty of anti-western vitriol: “In the US, they sit there across the pond, and sometimes I think they feel like they’re in a lab and performing some experiments on rats.”

- He said that if Ukraine did not pay its bill to Gazprom for February, the debt would be $2bn.

More on Gazprom and Ukraine. While Putin was speaking, Jack Farchy filed a story reporting that Gazprom will raise gas prices for Ukraine from the start of next month because the country has failed to pay its debts.

Chief executive Alexei Miller said:

“In these conditions, where Ukraine is not meeting its obligations, not fulfilling the agreements reached under the contract providing the discount, Gazprom has decided not to extend the discount from the beginning of next month.”

Here’s the latest financial market action:

Moscow’s Micex is up 5.1 per cent at 1,355.21

The FTSE Eurofirst 300 is up 1.7 per cent at 1,340.81

The Xetra Dax 30 in Frankfurt is up 2.1 per cent at 9,558.48

The CAC 40 in Paris is up 2.3 per cent at 4,389.93

London’s FTSE 100 is up 1.5 per cent at 6,809.77

Gold is weaker, down $14 per troy ounce at $1,336.30

Brent crude is 1.6 per cent lower at $109.40 a barrel

Kiran Stacey reports that UK Foreign Secretary William Hague has been answering questions on Ukraine in the House of Commons.

He has given Hugh Powell, the foreign office official photographed carrying a secret briefing paper on Ukraine into Number 10, a ticking off, calling the incident “regrettable”. But he insisted, despite the document’s insistence that trade sanctions should not be implemented and that London should be protected as a financial centre, that all options remain on the table.

He has criticised President Putin’s remarks that Mr Yanukovich remains the legal president of Ukraine, saying: “It is wrong to question the authority [of the new regime].”

He also condemned Russian troops who have been filmed firing warning shots over the heads of their Ukrainian counterparts at an army base in Crimea.

Mr Hague said: “Deliberate provocation could give rise to a dangerous incident.”

But the foreign secretary was also keen to dial down anti-Russian rhetoric, urging for a “cool, calm” response from the west.

Courtney Weaver reports from Crimea’s Belbek airport, where Russian and Ukrainian soldiers are engaged in a nervous stand-off.

Eyewitnesses said that Russian soldiers first arrived at Belbek airport on February 2 at 9.30pm.

As of today, hundreds of them controlled the aerodrome itself, surrounding 10 unarmed Ukrainian soldiers braving their dominating presence and that of armed militants backed by the Russian soldiers that formed a perimeter on the outskirts of the base.

The Russian soliders hold regular negotiations with the Ukrainians, urging them repeatedly, though still unsuccessfully, to surrender.

Tensions were high this morning, as the Russian side fired multiple warning shots into the air. By mid-afternoon, neither side had budged.

Yuli Manchur, the Ukrainian commander of the base, said the Russian side has repeatedly refused to identify themselves, but noted that there were still Russian plates on their trucks, adding that they spoke in clean Russian.

Asked what it was like to negotiate with one of the leaders of the Russian soldiers, “Masked man”, he replied: “That’s his problem that he is masked.”

“We could have solved this [standoff] in 15 or 20 minutes,” he added.

Here are some photos from events today at the Belbek airbase (see 12.11pm entry):

Colonel Yuli Manchur, the Ukrainian commander, speaks with Russian troops (Getty)

Russian troops fire warning shots (Getty)

Ukrainian troops at the airbase

Jan Cienski reports from Kharkiv in eastern Ukraine that the new government in Kiev is reasserting control over the area after a week of near anarchy following the fall of Viktor Yanukovich.

Hundreds of police were patrolling the streets of Kharkiv, the leading city in the east, as a new governor appointed by Kiev was sworn in. Arsen Avakov, the new interior minister, was present at the ceremony, where he promised “rule of law and order, police on the streets and no gangs from other areas”.

He also said he was tightening controls on the Ukrainian-Russian border to prevent agitators from crossing to take part in local demonstrations.

Kharkiv’s regional government building had been occupied for several days by protesters supporting Yanukovich’s overthrow. They were driven out of the building on Saturday by an anti-government mob which beat them severely.

Now, municipal workers are dismantling the scruffy camp the anti-government protesters had set up around Kharkiv’s Lenin monument.

“All this makes me feel a lot safer,” said a well-dressed man surveying the clean-up while sipping a coffee at a nearby bar.

People on Twitter have been comparing Putin’s performance to his article in the New York Times last September in which he strongly criticised the US for its proposed strike on Syria.

Here’s an excerpt:

“The potential strike by the United States against Syria, despite strong opposition from many countries and major political and religious leaders, including the pope, will result in more innocent victims and escalation, potentially spreading the conflict far beyond Syria’s borders. A strike would increase violence and unleash a new wave of terrorism. It could undermine multilateral efforts to resolve the Iranian nuclear problem and the Israeli-Palestinian conflict and further destabilize the Middle East and North Africa. It could throw the entire system of international law and order out of balance.”

And another:

“From the outset, Russia has advocated peaceful dialogue enabling Syrians to develop a compromise plan for their own future. We are not protecting the Syrian government, but international law. We need to use the United Nations Security Council and believe that preserving law and order in today’s complex and turbulent world is one of the few ways to keep international relations from sliding into chaos. The law is still the law, and we must follow it whether we like it or not. Under current international law, force is permitted only in self-defense or by the decision of the Security Council. Anything else is unacceptable under the United Nations Charter and would constitute an act of aggression.”

Peter Spiegel reports from Brussels that the second meeting in three days of Nato’s decision-making North Atlantic Council has taken a midday break and will reconvene at 3pm, according to alliance officials.

Today’s meeting is being held at the request of Poland, which yesterday invoked Article 4 of the alliance’s self-defence treaty, which is used only when an ally feels it is under threat. It is only the fourth time in Nato’s history an Article 4 consultation has been held.

“The feeling is that the continued escalation in Ukraine because of the military intervention by Russia poses a risk, a threat to the allies in the region and beyond,” said Oana Lungescu, the Nato spokeswoman, during the NAC recess. “We see very few signs of a military de-escalation. In some cases, the reverse.”

The US Treasury has issued a statement on aid to Ukraine, the highlight being the administration is working with Congress and the government of Ukraine to provide $1bn in loan guarantees.

Here’s the statement, issued in the name of Treasury secretary Jack Lew:

We have been working closely with international partners to develop an assistance package that will help the Ukrainian government implement the reforms needed to restore financial stability and return to economic growth. The new government of Ukraine has said publicly and committed privately that it has the political will to meet its urgent challenges. The United States is prepared to work with its bilateral and multilateral partners to provide as much support as Ukraine needs to restore financial stability and return to economic growth, if the new government implements the necessary reforms.

At the request of the Ukrainian government, a mission from the International Monetary Fund (IMF) is currently in Kiev working with the Ukrainian authorities. The IMF will be at the center of an international assistance package and is best placed to support Ukraine’s implementation of robust and market-oriented reforms. In parallel, the United States is working alongside international partners to assemble a package to help make the IMF program a success.

As part of this international effort, the United States has developed a package of bilateral assistance focused on meeting Ukraine’s four most pressing needs: implementing critical economic reforms and cushioning their impact on vulnerable Ukrainians; conducting free, fair and inclusive elections, with robust involvement by a strong and independent civil society and media; combatting corruption and recovering stolen assets; and withstanding politically motivated trade actions by Russia.

Specifically, the US administration is working with Congress and the government of Ukraine to provide $1bn in loan guarantees, the proceeds of which will be aimed at protecting the most vulnerable Ukrainian households from the impact of the needed economic adjustment. We are working with Congress to approve the 2010 IMF quota legislation, which would support the IMF’s capacity to lend additional resources to Ukraine, while also helping to preserve continued US leadership within this important institution. The United States is also moving quickly to deploy a range of other financing and technical expertise, utilizing a whole-of-government approach to support Ukraine. The Departments of Commerce, Justice, Energy, State, Treasury, Federal Bureau of Investigation, and the US Agency for International Development are all preparing to deploy rapid assistance. For example, the United States Treasury is ready to dispatch highly experienced technical advisors to help the Ukrainian financial authorities manage immediate market pressures and support Ukraine as it negotiates with the IMF.

The US made its announcement as Secretary of State John Kerry arrived in Kiev for talks with the government.

Kathrin Hille has gone back over the Putin press conference and has dug up arguably the key quote:

“The tense situation in the Crimea, associated with the possible use of the armed forces, just dissipated, the need for that did not arise. The only thing which was necessary, and which we did, was to strengthen the protection of our military installations.

“Therefore I believe that it will not be necessary for us to do anything like that in eastern Ukraine.”

Russian foreign minister Sergei Lavrov reiterates that Russia does not believe it is violating any agreements in what it is doing in Ukraine:

The US Treasury has given more details about its aid to Ukraine:

We are ready to work with Congress and the Government of Ukraine to provide U.S. loan guarantees and other financial and technical assistance to address Ukraine’s four most urgent needs:

Critical assistance with economic reforms, including by cushioning their impact on vulnerable Ukrainians: The U.S. Administration is working with Congress and the Government of Ukraine to provide $1 billion in loan guarantees aimed at helping insulate vulnerable Ukrainians from the effects of reduced energy subsidies. At the same time, the United States is moving quickly to provide technical expertise to help the National Bank of Ukraine and the Ministry of Finance address their most pressing challenges. The United States is dispatching highly experienced technical advisors to help the Ukrainian financial authorities manage immediate market pressures. The United States will also provide expertise to help Ukraine implement critical energy sector reforms.

Conducting free, fair, and inclusive elections: The United States will provide technical assistance to train election observers, help bring electoral processes in line with international standards, and promote robust participation by civil society organizations and a free and independent media.

Combatting corruption and recovering stolen assets: The United States is preparing to help the government respond to the clear demands of the Ukrainian people for more robust safeguards against corruption and additional efforts to recover assets stolen from the people of Ukraine. The United States will support the government as it takes tangible steps to reduce corruption and increase transparency, including in areas such as e-government and public procurement. The United States is deploying an interagency team of experts to Kyiv this week to begin to work with their Ukrainian counterparts to identify assets that may have been stolen, identify their current location, and assist in returning those assets to Ukraine.

Withstanding politically motivated trade actions by Russia, including in the area of energy: The United States is preparing to provide technical advice to the Ukrainian government on Ukraine’s WTO rights with respect to trade with Russia. At the same time the United States is ready to provide assistance and financing to help Ukrainian businesses find new export markets and adjust to trade pressures and to enhance energy efficiency, helping to reduce dependence on imported gas.

Roman Olearchyk reports from Kiev that Andriy Parubiy, Ukraine’s national security chief, said Russia’s “psychological attack” – aimed at sparking violent clashes that would justify use of broader military force – had failed because Ukraine’s Crimea-based armed forces did not capitulate to ultimatums by Russian soldiers for them to surrender.

“The psychological attack which was yesterday used against Ukraine’s military in the form of ultimatums setting a deadline for surrendering their arms and pledging allegiance to the Russian-backed separatist government of Crimea has “completely failed”, he said on television.

“Not one solider, not one of the bases turned sides. They all remained loyal to their oath to Ukraine.”

Mr Parubiy went on to detail how Russian soldiers and armed separatists they are backing tried overnight to provoke and intimidate Ukraine’s armed forces at, for example, a national guard base in Crimea.

“They tried to break through the entrance” gates and “capture part of the people” there. Unarmed national guard troops, he claimed, protected themselves nonetheless and pushed them back “without a single shot”.

Richard McGregor, FT Washington bureau chief, has dissected the Treasury statement:

The US statement of support for Ukraine, its release timed to coincide with John Kerry, the Secretary of State’s arrival in Kiev, offers both bilateral financial aid and political advice to the country’s incoming rulers.

As expected, the administration will work with Congress to offer $Ibn in loan guarantees, which a Treasury statement said “will be aimed at protecting the most vulnerable Ukrainian households from the impact of the needed economic adjustment.”

The US is also offering more political advice to Ukraine on a series of fronts, ranging from how to conduct elections to “withstanding politically motivated trade actions by Russia”.

The administration is also using the Ukraine crisis to attempt to get Congress to approve new funding for the International Monetary Fund, something that it failed to do in the last budget.

Sam Jones, defence and security editor, comments on Putin’s assertion that the armed forces in Crimea are self-defence units who acquired their uniforms at a shop.

Madison Marriage reports that Barclays analysts have downgraded Russian sovereign credit:

“For the Russian credit complex, we think that the threat of restrictions to export markets is a clear credit negative. We downgrade Russian sovereign credit to underweight in our Global EM Credit portfolio and also expect Russian corporates/financials to remain volatile.

“Overall, we see Rosneft and Gazprom as most vulnerable given recent developments, and MTS and Polyus Gold as more defensively positioned.”

Morgan Stanley chart on European nations’ dependency on Gazprom:

Daniel Dombey reports from Istanbul that The Turkish general staff said in a statement on Tuesday that it had scrambled eight F-16 fighters in a “patrol and prevention mission” after a Russian IL-20 surveillance aircraft flew parallel to Turkey’s Black Sea coast in international airspace.

Courtney Weaver reports that there’s little sign of a breakthrough in the stand-off at Belbek airport

If you want to relive President Vladimir Putin’s press conference, here’s the official translation of the transcript.

The civility of a press conference with Vladimir Putin

Gideon Rachman, the FT’s chief foreign affairs commentator, has made a video in which he discusses the likely next moves by Russia, Europe, US and China in the crisis.

Jmes Fontanella-Khan and Andrew Byrne report from Brussels on the possible sanctions the EU might impose if Russia does not withdraw its forces by Thursday.

US Secretary of State John Kerry (2nd L) stands in front of the Shrine of the Fallen, a shrine to anti-government protesters who died during the February clashes with riot police in Kiev

From Peter Spiegel in Brussels:

For those keeping score, since Russia has moved into Crimea, Nato’s ambassadors have met at the alliance’s Brussels headquarters three different times in three different formats: On Saturday, they met in emergency session of the North Atlantic Council, Nato’s top decision-making body, and then as the Nato-Ukraine Commission, a formal bilateral body set up by a 1997 agreement with Kiev. Then today, the NAC met again — but this time under Article 4 of their mutual-defence treaty, which is only invoked when an alliance member believes it is facing a credible threat.

Now comes a fourth: the Nato-Russia Council. On Monday, Anders Fogh Rasmussen, asked Alexandr Gushko, the Russian envoy to Nato, if he was interested in meeting Nato members on Wednesday in this format, set up in 2002. Well, today Mr Gushko agreed, according to Nato’s spokeswoman.

FT commentator John McDermott has examined when and how sanctions (usually don’t) work.

Mikheil Saakashvili, president of Georgia when Russia invaded in 2008, has written a punchy op-ed for the FT, fearing that current developments suggest that Europe and the US are going to abandon countries every time they defy Moscow .

He concludes:

Mr Putin’s plan for Ukraine is brutally clear. Chopping off parts of its territory, and generating chaos in the rest of the country, will undermine Europe’s enthusiasm for welcoming Ukraine into its fold. That will make the country easy prey for a vindictive Russia.

It will not stop here. If Mr Putin succeeds he will go after the Baltic countries next. If they want to prevent this, the EU and Nato need to act now. They should consider the full range of options, from economic sanctions to military deterrence.

These measures will not come cheap. But doing nothing would ultimately prove far more costly. For that way lies squandered opportunity and deep regret.

In our 1:46pm post we looked at European nations’ dependency on Gazprom. Now here’s a Morgan Stanley & Bloomberg chart of countries’ export exposure to Russia:

US stocks are climbing in the wake of Russian President Vladimir Putin’s press conference in which he appeared to step back from escalation in Ukraine, fastFT reports.

At pixel time, the S&P 500 is up 1.3 per cent at 1,869.59 while the Dow Jones Industrial Average is 1.2 per cent higher at 16,363.97.

The S&P 500 touched a new intraday record high on Tuesday morning in New York, bringing year-to-date gains to 1.1 per cent.

Barclays analysts said:

Risk aversion has eased slightly on reports that Russia has ordered troops to return to their bases.

More from Kiev, where US Secretary of State John Kerry is meeting with Ukrainian opposition leaders.

FT correspondent Roman Olearchyk writes that Ukraine’s national security chief has made a bold call:

Andriy Parubiy said on Tuesday that the Kremlin’s plan to partition Ukraine on an east-west axis failed.

“They thought they would be met here with flowers, and that our armed forces would enmasse switch to their side, but this did not happen,” he said.

“The entire international community in these days came to Ukraine’s side… Russia’s foreign policy strategy completely failed,” he added.

Over on FT’s beyondbrics, a look at Ukrainian bonds. They’re benefitting from the broader relief rally but still at the brink, as this chart of Ukraine $1bn sovereign bond maturing on June 4 shows:

Read the whole post here.

(AFP/Getty Images)

Neil Buckley has filed his review of Vladimir Putin’s press conference today: “a classic performance: clever, tough, sardonic and deeply cynical.”

He writes:

Possibly, he blinked in the face of the western backlash over Russia’s creeping occupation of the Black Sea peninsula. More likely, after that slickly-executed operation, and the far more serious threat to send Russia’s army into eastern Ukraine, he felt he had made his point – for now.

Yet perhaps the clearest message from Mr Putin’s press conference was his contempt for Mr Yanukovich – hours after Russia’s ambassador to the UN cited a letter from the ousted president requesting Moscow to use force in Ukraine as a justification for its actions in Crimea.

Read the full story here.

Anders Fogh Rasmussen, NATO secretary-general, has just given a statement following the North Atlantic Council’s meeting today (see 2:43pm entry).

Although the meeting was held under the alliance’s Article 4, which only is invoked when an alliance member believes its under threat, it includes no new policy initiatives beyond what has been announced publicly.

The statement calls the situation a “grave crisis” and says Nato allies “stand together in the spirit of strong solidarity”.

Despite repeated calls by the international community, Russia continues to violate Ukraine’s sovereignty and territorial integrity and to violate its international commitments.

We continue to support all constructive efforts for a peaceful solution to the current crisis in accordance with international law.

It adds that Nato will “engage” with Russia in the Nato-Russia Council, which, as previously reported, plans to hold a meeting tomorrow.

Update: here’s a link to the full Nato statement.

In Washington, John Boehner, House speaker, is calling on President Barack Obama to “stand up to Putin” by expediting approval of US liquefied natural gas exports.

Mr Boehner said:

The United States has abundant supplies of natural gas – an energy source that is in demand by many of our allies – and the US Department of Energy’s excruciatingly slow approval process amounts to a de facto ban on American natural gas exports that Vladimir Putin has happily exploited to finance his geopolitical goals. We should not force our allies to remain dependent on Putin for their energy needs. Ending this de facto ban and expediting approval of natural gas exports is one clear step the US. can take to stand by our allies and stand up to Russian aggression, while creating American jobs at the same time.

Peter Spiegel in Brussels sends over the link to the full Nato statement, made just a few minutes ago (see 4:11pm entry):

On fastFT, Henry Foy reports that fears over Ukraine are casting a cloud over the annual Geneva Motor Show:

The crisis in Ukraine has wide ramifications for global carmakers, who sell millions of cars in Russia, and would be hurt by a weakening rouble. They would also be affected by any prolonged crisis reducing economic growth or market sentiment in the rest of Europe.

“There is absolutely no doubt in my mind that if the situation between Russia and the Ukraine remains as tight as it is, or gets worse, that it will dampen demand in Western Europe,” said Sergio Marchionne, chief executive of Fiat Chrysler Automobiles.

Read the post here.

A follow-up on our report this morning that Gazprom will raise gas prices for Ukraine from the start of next month because the country has failed to pay its debts:

Sam Jones, defence and security editor, reports on some more sabre rattling from Europe in response to Russia’s (now ended) military exercises along its western border in recent days: Sweden has dispatched an undisclosed number of Saab Gripen jets to Gotland island in the middle of the Baltic Sea.

Alleged infringements of Ukrainian and Lithuanian airspace by Russian fighters in recent days are the ostensible motive. The US rebased four F-15s from its UK base at Lakenheath to the Baltic last week. Sweden and Finland, another non-Nato Nordic nation, participate in Nato air patrols over the Baltics.

“Due to the increased air operations in the area, and especially as a result of the Russian training exercise going on, we’ve decided to base parts of our regular incident response team on Gotland,” said Göran Mårtensson of the Swedish Försvarsmaktens. “By doing this we’re increasing our capacity to monitor the skies, which is completely normal during major training exercises.”

John Kerry has just spoken in Kiev, where he has been meeting with Ukrainian opposition leaders. He said the US condemned Russia’s actions and accused the government of Vladimir Putin of “hiding its hand behind falsehoods, intimidation and provocation.”

Some highlights from his remarks:

Not a single piece of credible evidence supports any one of [Russia's] claims, none.

In the eyes of Ukraine and the world, there is nothing strong about what Russia is doing.

The larger point is this: it is diplomacy and respect for sovereignty, not unilateral force that can best solve disputes like this in the 21st century.

We are not seeking confrontation. There are better ways for Russia to pursue its legitimate interests in Ukraine.

He also called on Russia to not just permit but “encourage” international monitors in Ukraine.

While in Kiev Mr Kerry also visited the Shrine of the Fallen, a memorial to the protesters killed last month in demonstrations against Viktor Yanukovich:

Richard McGregor in Washington has also been following John Kerry’s statement today and highlights the US secretary of state’s emphasis on the
penalties facing Russia
if it does not “de-escalate”:

Kerry says the US will isolate Russia “politically, economically and diplomatically” unless Moscow withdraws its troops from Ukraine. “This is not something we are seeking to do,” he said. “This is something that Russia may force us to do.”

John Kerry took a question from NBC’s Andrea Mitchell, who mentioned Vladimir Putin’s denial that Russia troops are in Crimea – and interrupted her to say, with a smile, “He really denied having troops in Crimea?”

In a fit of bad timing, US President Barack Obama began speaking in Washington while John Kerry was still taking questions at his press conference in Kiev.

Mr Obama said that the Russian troops inside Ukraine is not “a sign of strength” from Mr Putin. Rather, he said that it would add to already existing suspicions that many of the countries in the region have about Russia.

“There is the ability for Ukraine to be a friend of the West’s and a friend of Russia’s as long as none of us are inside of Ukraine trying to meddle and intervene, certainly not militarily, with decisions that properly belong to the Ukrainian people.”

He continued, “President Putin seems to have a different set of lawyers making a different set of interpretations. I don’t think that’s fooling anybody.”

He emphasised that “the course of history” pointed to Ukraine’s right to determine its own independent future, saying the international community should support elections planned for May.

Claire Jones, eurozone economy correspondent, has flagged up why economists think risk of Russia turning off gas tap to EU is slim.

She writes on the FT’s Money Supply blog:

Besides Russia’s domestic woes, another the big reason why the gas tap to the EU will almost certainly remain on is that it has done so for the past 40 years.

It is worth remembering that this trading relationship predates the fall of the Berlin Wall: the USSR has supplied gas to the rest of Europe since the 1970s and never before has it cut off supplies.

Read the full post here.

James Politi, US economics and trade correspondent, tweets about the difficulty of estimating US-Russia economic ties:

Elsewhere on this blog, Jan Cienski, Warsaw correspondent, writes about how his ancestor helped bring about a Russian invasion of Poland in the 18th century — a cautionary tale for Viktor Yanukovich.

FT Washington bureau chief Richard McGregor sends some thoughts about the remarks a short while ago from US President Barack Obama and John Kerry, secretary of state:

Although there are varying interpretations of Vladimir Putin’s press conference – about whether he had stepped back from the brink or was merely biding his time – neither Mr Obama nor Mr Kerry in their comments seemed to shift their position at all in response.

In the knowledge that the crisis in the Ukraine is likely to be a long and drawn out affair, neither moved from their stance that Russia withdraw all its troops from the Ukraine, or return them to their barracks at existing bases.

JPMorgan analysts have put out a note warning of the impact of the crisis on growth in Ukraine and Russia:

- Russian 2014 growth estimate cut to 0.8 per cent from previous 1.8 per cent.
- Ukrainian economy now forecast to shrink 3.2 per cent this year from earlier estimate of 0.5 per cent growth.

However, they note:
- “Trade and financial-sector spillovers to Central Europe are expected to be modest”
- “We see no need to make any specific revisions to our forecasts for growth elsewhere in Western Europe, nor to our forecasts for policy actions by central banks”

JPM sees four “main channels of potential impact”: energy prices, direct trade, financial institutions and the slightly vague “confidence”.

Energy prices. Russia supplies around 30% of Europe’s consumption of natural gas and 5 of the 12 pipelines that provide much of that supply pass through the Ukraine. Russia is also a significant supplier of crude oil to Europe, some of which passes through Black Sea ports. Among the easiest ways to motivate Ukrainian tensions into significant impacts on Western European growth is via some form of supply curtailment … At this point, however, there appears a high degree of mutual interest in keeping those energy supplies flowing between Russia and the rest of Europe, and this is far from the only influence on European energy prices

Financial impact. According to our European banks team, direct exposures of European banks to Russia stands near €56bn, while direct exposure to the Ukraine is near €15bn. That needs to be scaled relative to a total balance sheet of just over €25tn for Euro area banks alone. There are a handful of individual institutions for whom these exposures may be troubling. But our suspicion at this stage is that the largest impact would be likely on credit supply from multinational banks into Central Europe, rather than on credit in Western Europe more directly.

They also include a few charts, notably tracking the largest exporters to Russia and Ukraine (based on 2011 data):

From Richard Blackden on our fastFT desk in New York:

What a difference a day makes. Having retreated on Monday as fears of an escalation in the Ukrainian crisis dominated, US stocks rallied on Tuesday on relief the worst hasn’t happened.

The S&P 500 was 1.5 per cent stronger in early afternoon trading at a fresh high, and will have its best day since December should the index hold onto the gains. The Dow Jones Industrial Average was up 1.4 per cent at 16395.95.

Kit Juckes, a strategist at Societe Generale, offers a note of caution on the crisis.

“And no, of course, it’s not ‘all over’. But financial markets are short-sighted animals and everything is calmer.”

The Sochi Winter Olympics boosted Russia’s image in the eyes of the international media for just three days, a Swiss research institute reported on Tuesday, with western coverage now more negative than before the Games began. Andrew Edgecliffe-Johnson, US news editor and former media editor, breaks down the findings:

Media Tenor International, which monitors the tone of reporting on television networks from the US to Europe, said by February 26 “reports on Russia’s role in Ukraine swept away sign of positivity”. Within a week of the opening ceremony, 70 per cent of international reports on Russian president Vladimir Putin were negative in tone.

“As long as Russia’s intervention in Ukraine does not result in an internationally accepted solution, Russia’s and Putin’s image cannot improve,” said Roland Schatz, Media Tenor International’s founder and CEO. Russia’s international media image has been eroding since the beginning of the millennium, he said.

“The policy crisis highlights that the Sochi Winter Olympics and similar large sporting events don’t ultimately pay off for the image of the host countries,” he added.

Highlighting the patchy record of countries receiving long-standing image benefits from hosting big sporting events, he said Russia had received a smaller image boost than Canada or the UK did when they hosted the Vancouver and London Olympics.

From the FT’s defence and security editor:

In another piece of the diplomatic puzzle, Laurent Fabius, France’s foreign minister, held a “substantial discussion” on Ukraine today by telephone with Wang Yi, his Chinese counterpart, reports Hugh Carnegy in Paris.

A brief statement from the Quai d’Orsay, the French foreign ministry, said the two “agreed on the major principles that must lead to a solution of the crisis, notably a de-escalation (of military actions) and a political solution”.

No mention of sanctions – or “targeted measures” – against Russia that France is considering along with its European partners. Keeping China from taking unequivocal sides with Moscow is doubtless one of the considerations in deciding what steps to take.

British foreign secretary William Hague will be in Paris on Wednesday to discuss Ukraine with President François Hollande and Mr Fabius ahead of the EU summit on Thursday.

Aaron Stanley in the FT Washington bureau has flagged up a new report on energy security risks – and Ukraine does not fare well.

The US Chamber of Commerce just released an index ranking 25 large countries on energy security, with Ukraine coming in dead last.

The report cites the country’s heavy reliance on imports (ie percentage spent on fossil fuel imports as a share of GDP is much higher than the OECD average) and inefficient usage as the main culprits.

(US Chamber of Commerce)

In fact, Ukraine has ranked last on this index every year since 1992.

There’s also an interactive tool that breaks the report down country by country.

More on our earlier report (see 4:15pm) about John Boehner, US House speaker, calling for the US to speed up natural gas exports.

Barney Jopson reports:

[Mr] Boehner’s statement on Tuesday highlighted how booming supplies of oil and gas from the US’s shale production boom have the potential to affect global geopolitics and security.

The US debate on how to use its new oil and gas supplies, which are under tight export restrictions, has hitherto focused on jobs and the impact on fuel prices for consumers and companies. But Ukraine is rewriting the terms of the debate.

John Kerry tweets another picture from his visit to Kiev. The US secretary of state is now en route to Paris for meetings on Wednesday.

EmoticonReuters reports that Russia’s defence ministry says it test-fired an intercontinental ballistic missile today:

The Strategic Rocket Forces launched an RS-12M Topol missile from the southerly Astrakhan region near the Caspian Sea and the dummy warhead hit its target at a proving ground in Kazakhstan, the state-run news agency RIA cited Defence Ministry spokesman Igor Yegorov as saying.

Sam Jones, FT defence and security editor, notes that Russia last performed ballistic tests in December, and that Nato secretary-general Anders Fogh Rasmussen accused Russia of developing new offensive ballistic weapons a few weeks ago, disguising them as defensive.

More from Sam Jones on Russia’s missile test:

David Oakley reports that eurozone peripheral government bonds are behaving like haven assets as Russia’s occupation of Crimea drives some investors into a region once shunned.

Spanish two-year yields, which have an inverse relationship with prices, have enjoyed one of the sharpest falls in the past week as tensions have mounted in Crimea. They dropped to 0.73 per cent on Tuesday compared with 0.80 per cent on Monday last week.

Italian and Spanish 10-year bond yields have also dropped sharply. Italian 10-year yields fell to 3.44 per cent on Tuesday from 3.62 per cent on Monday of last week, while Spanish 10-year debt dropped from 3.55 per cent to 3.46 per cent over the same period.

Even more significantly, the peripheral bond markets are trading in a similar way to German Bunds, Europe’s traditional haven, as the yield spread between the eurozone periphery and Germany has remained steady over the past week.

Ukrainian air force pilots guard their air base in Belbek, near Sevastopol. A placard reading “No war!” is attached to the gate (AFP/Getty)

A woman holds an umbrella as she stands on the pier in Sevastopol watching a covert of coots and military ships (AFP/Getty)

A Ukrainian air force pilot sits on sand bags in the military air base in Belbek (AFP/Getty)

The EU has agreed on sanctions against some Ukrainian individuals, reports Andrew Byrne in Brussels:

Even as EU diplomats weighed sanctions against Russia, they agreed on
Tuesday to freeze the assets of 18 people in the deposed Ukrainian regime
of Victor Yanukovich.

The decision, taken at a meeting of EU ambassadors in Brussels on Tuesday,
does not include travel bans, according to EU diplomats. It will be
officially approved on Wednesday and become effective on Thursday.

That list of 18 people whose assets are set to be frozen by the EU includes Viktor Yanukovich, the Ukrainian president who fled to Russia last week, reports Christian Oliver.

Kathrin Hille in Moscow has more details on Russia’s missile launch:

Late Tuesday night, Russia said it had successfully test-fired an intercontinental ballistic missile. The RS-12M Topol missile, which is capable of carrying nuclear warheads, was launched from a base in Astrakhan, north of the Caspian Sea and about 450km from Ukraine’s eastern border, state news agency Ria reported, quoting the defence ministry.

The test followed a three-day snap drill in Russia’s western and central military regions which Moscow has called largely unrelated to the Ukraine crisis but which has been read as a threat gesture.

The Kapustin Yar test base is one of Russia’s research site for ways to overcome missile defence systems. US plans to build a missile defence shield in Europe have been among the biggest irritants in Russia’s relations with the West as President Vladimir Putin has argued it undermines Russia’s security.

Via Reuters’ chief markets correspondent in Europe, a bullish read from Société Générale:

Here’s a quick round-up of developments on Tuesday:

EmoticonRussia said it fired an intercontinental ballistic missile. The RS-12M Topol missile, which is capable of carrying nuclear warheads, was launched from a base in Astrakhan, about 450km from Ukraine’s eastern border, the defence ministry said.

EmoticonThe EU has agreed to freeze the assets of 18 people in the deposed Ukrainian regime of Victor Yanukovich – including Mr Yanukovich.

EmoticonThe US is still insisting on a full Russian withdrawal from Ukraine. President Barack Obama said Moscow’s troop presence is not “a sign of strength” from Mr Putin. John Kerry, secretary of state, warned that Russia would be isolated “politically, economically and diplomatically”.

EmoticonRussian President Vladimir Putin broke his days-long silence in a press conference in Moscow where he said tensions in Crimea had “dissipated”. But, he warned, the use of force remained an option.

EmoticonJohn Kerry travelled to Kiev with an offer of $1bn in loan guarantees and promises of technical assistance.

EmoticonThe US is weighing Iran-style banking sanctions on some Russian financial institutions if Moscow were to send troops into eastern Ukraine.

EmoticonWorld markets rallied with relief on the apparent easing of tensions. Russia’s rouble-denominated Micex equity index bounced 5.3 per cent following Monday’s 10.8 per cent slide. The rouble rallied nearly 1.3 per cent against the dollar. In New York, the S&P 500 set new intraday highs.

EmoticonAnalysts warned of the impact of the crisis on broader economic growth. JPMorgan cut its 2014 estimates for both Russia and Ukraine, while Barclays analysts have downgraded Russian sovereign credit.

In tomorrow’s FT: Europe’s dilemma over Ukraine

So far, the assumption had been that it was possible to maintain economic ties without compromising the security of EU citizens. The crisis in Ukraine has exposed the limits of this dual approach.

To prevent a further escalation of violence, its member states must be ready to take a tough diplomatic stance towards Russia. This may include the use of sanctions that risk undermining some of the bloc’s extensive business interests.

US Secretary of State John Kerry (center) boards a plane to Paris, accompanied by Andrii Deshchytsia, Ukraine foreign minister (right), following a visit to Kiev on Tuesday. (AFP/Getty)

Canada is the latest nation to suspend military exercises with Russia, The Globe and Mail reports. On Monday, the US suspended its military engagements, as well as trade and investment talks.

Christopher Granville, director of Russia research at Trusted Sources takes a crack at parsing Putin over on beyondbrics. His model? The Yukos affair.

In the Yukos case, the interest in question was to stop an oligarch who was using his controversially acquired wealth to make a challenge for power. The result was extensive collateral damage to the investment climate centered on concerns about the security of property rights.

In the present case of Ukraine, the paramount interest is upholding a Russian version of the Monroe Doctrine according to which countries in Russia’s immediate sphere of vital interest should not fall into the hands of anti-Russian politicians supported by external powers (that is, the US and the EU).

FT US markets editor on today’s equity rally:

Via Geoff Dyer in Washington, the White House comments on Russia’s missile launch:

This was a previously notified and routine test launch of an ICBM. As required under the New Start Treaty, Russia provided advance notification of this launch to the United States. Such advance notifications are intended to provide transparency, confidence, and predictability and to help both sides avoid misunderstandings. Russia and the United States routinely flight test their ICBMs and SLBMs.

From fastFT: US stocks finished at new record high today, with more than 95 per cent of stocks in the S&P 500 index rising.

US equities rallied at their fastest clip since the year began on Tuesday as the prospect of war in Ukraine dimmed. The gains were helped by sharp rebuttals from the US and western powers calling for Russia to step back from deeper confrontation, and word that Mr Putin would use military action only as a “last resort”.

The S&P 500 surged 1.5 per cent to 1,873.97, a new record high, while the Dow Jones Industrial Average climbed 1.4 per cent to 16,394.31.

Treasury yields jumped as tensions in Ukraine moderated, rising 9 basis points to 2.692 per cent as investors shifted back into riskier assets.

Stefan Wagstyl, Roman Olearchyk and Jan Cienski report on the interim Ukrainian goverment’s efforts to consolidate control over the country:

Officials have also ordered streets to be cleared of the debris of protests to restore a sense of normality. Arseniy Avakov, interior minister in the government that has taken over from ousted president Viktor Yanukovich, pledged in Kharkiv that there would be “rule of law and order, police on the streets and no gangs from other areas.”

Members of a so-called Maidan self-defence unit march as they carry a coffin containing the body of a friend near a barricade in the centre of Kiev on Tuesday. (AFP/Getty)

The closing ceremonies of the Sochi Olympics were barely 10 days ago – and the Paralympic games are set to start this week. But which nations will compete?

Wondering which western banks are most exposed to Ukraine and Russia? We’ve got a rundown:

The most exposed to Russia is Austria’s Raiffeisen, which had more than half its pre-tax profits coming from the country last year, according to analysts at Berenberg. The bank’s shares bounced back 5.8 per cent to close at €24.16 on Tuesday after a 10 per cent fall on Monday. The latest unrest has already stalled the sale of its Aval subsidiary, which has 818 branches in Ukraine and assets worth €4.5bn. Raiffeisen said on Monday it had put the sale on hold.

Société Générale is the second most exposed foreign bank to Russia, which accounts for about 4 per cent of its total revenues. SocGen’s Russian unit, which has 620 branches and 5m clients, suffered a €250m goodwill writedown in 2012. But it returned to profit last year with a €165m contribution to the French bank’s bottom line. Shares in SocGen fell 5.4 per cent on Monday but rose 3.4 per cent to close at €47.3.

US banks including JPMorgan Chase and Citigroup were already warning about a weak quarter for trading revenue even before the crisis in Europe. One executive said the most immediate and inescapable effect was a worsening of investor sentiment.

Read the rest here.

US Secretary of State John Kerry has arrived in Paris, says NBC’s Andrea Mitchell. He will meet with European leaders – and the Ukrainian foreign minister – ahead of Thursday’s EU summit.

Zbigniew Brzezinski, US national security adviser to President Jimmy Carter from 1977 to 1981, says that Nato and the West must be prepared to act.

From his Washington Post column:

Much depends on how clearly the West conveys to the dictator in the Kremlin — a partially comical imitation of Mussolini and a more menacing reminder of Hitler — that Nato cannot be passive if war erupts in Europe. If Ukraine is crushed while the West is simply watching, the new freedom and security in bordering Romania, Poland and the three Baltic republics would also be threatened.

This does not mean that the West, or the United States, should threaten war. But Russia’s unilateral and menacing acts mean the West should promptly recognize the current government of Ukraine as legitimate.

Meanwhile, NATO forces, consistent with the organization’s contingency planning, should be put on alert. High readiness for some immediate airlift to Europe of U.S. airborne units would be politically and militarily meaningful. If the West wants to avoid a conflict, there should be no ambiguity in the Kremlin as to what might be precipitated by further adventurist use of force in the middle of Europe.

Courtney Weaver wrote today about the stand-off at Belbek military air base, which saw the only shots fired so far since the conflict began.

Via Christopher Miller, editor at the English-language Kyiv Post, here’s a video of the face-off, and the warning shots:

That’s a wrap for the live blog for now. We’ll be tracking the latest developments on the home page, and you can follow all of our Ukraine coverage here.

To recap, these were the major developments on Tuesday:

- The US is still calling for Russia to fully withdrawal from Ukraine. President Barack Obama said Moscow’s troop presence is not “a sign of strength”. John Kerry, secretary of state, accused Russia of “hiding its hand behind falsehoods, intimidation, and provocations.”

- Russian President Vladimir Putin held a press conference in Moscow where he said tensions in Crimea had “dissipated”.

- World markets rallied on the apparent easing of tensions. Russia’s rouble-denominated Micex equity index bounced 5.3 per cent following Monday’s 10.8 per cent slide. The rouble rallied nearly 1.3 per cent against the dollar. In New York, the S&P 500 finished at a new record high.

- EU diplomats agreed to freeze the assets of 18 people in the deposed Ukrainian regime of Victor Yanukovich – including Mr Yanukovich.

- Russia said it fired an intercontinental ballistic missile. The RS-12M Topol missile, which is capable of carrying nuclear warheads, was launched from a base in Astrakhan, about 450km from Ukraine’s eastern border, the defence ministry said. The White House noted that the launch had been long planned.

- The first – and only, so far – shots were heard at Belbek military air base near Sevastopol. Russian troops fired warning shots but they seemed to have been forgotten by the afternoon.

- John Kerry travelled to Kiev with an offer of $1bn in loan guarantees and promises of technical assistance.

- The US is weighing Iran-style banking sanctions on some Russian financial institutions if Moscow were to send troops into eastern Ukraine.