SEVASTOPOL / DONETSK, Ukraine (Reuters) — Russia shipped more troops and armor into Crimea on Friday and repeated
its threat to invade other parts of Ukraine, showing no sign of
listening to Western pleas to back off from the worst confrontation
since the Cold War.
Russia's stock markets tumbled and the cost of insuring its debt
soared on the last day of trading before pro-Moscow authorities in
Crimea hold a vote to join Russia, a move all but certain to lead to
U.S. and EU sanctions on Monday.
The Russian Foreign Ministry, responding to the death of at least
one protester in Ukraine's eastern city of Donetsk, repeated
President Vladimir Putin's declaration of the right to invade to
protect Russian citizens and "compatriots".
"Russia is aware of its responsibility for the lives of compatriots
and fellow citizens in Ukraine and reserves the right to take people
under its protection," it said.
Ukrainian health authorities say one 22-year-old man was stabbed to
death and at least 15 others were being treated in hospital after
clashes in Donetsk, the mainly Russian-speaking home city of
Ukraine's ousted President Viktor Yanukovich.
Organizers of the anti-Moscow demonstration said the dead man was
from their group.
Moscow denies that its forces are intervening in Crimea, an
assertion Washington ridicules as "Putin's fiction". Journalists
have seen Russian forces operating openly in their thousands over
the past two weeks, driving in armored columns of vehicles with
Russian license plates and identifying themselves to besieged
Ukrainian troops as members of Russia's armed forces.
A Reuters reporting team watched a Russian warship unload trucks,
troops and at least one armored personnel carrier at Kazachaya bay
near Sevastopol on Friday morning. Trucks drove off a ramp from the
Yamal 156, a large landing ship that can carry more than 300 troops
and up to a dozen APCs.
U.S. Secretary of State John Kerry was due to meet Russian Foreign
Minister Sergei Lavrov in London later on Friday in a last-ditch
effort to head off the referendum in Crimea, now seen as all but
inevitable.
Russian troops seized the southern Ukrainian region two weeks ago as
a pro-Moscow regional government took power there. The new regional
authorities intend to secede from Ukraine and join Russia in a vote
described in the West as illegal.
"What we would like to see is a commitment to stop putting new facts
on the ground and a commitment to engage seriously on ways to
de-escalate the conflict, to bring Russian forces back to barracks,
to use international observers in place of force to achieve
legitimate political and human rights objectives," a U.S. State
Department official said ahead of Kerry's talks.
But Russia has shown no sign of veering from President Vladimir
Putin's plan to annex Crimea.
Putin declared on March 1 that Russia had the right to invade its
neighbor, a week after its ally Yanukovich fled the Ukrainian
capital following three months of demonstrations that ended with
about 100 people killed in the final days.
In further signs of Moscow's belligerent posture ahead of the Crimea
vote, the Defence Ministry announced on Friday it would hold
exercises with fighter jets and helicopters over the Mediterranean
Sea. On Thursday it announced artillery drills near Ukraine's
border.
U.S. and EU sanctions, including travel bans and asset freezes on
Russian officials and their firms, are now seen as inevitable. The
only mystery remaining is who will be on the lists of targets when
they are agreed at the start of next week.
U.S. and European officials say the targets will not include Putin
or Lavrov, but will include senior figures in the government and
members of parliament in an effort to impose hardship on Russia's
elite for backing Putin's policies.
The initial list would be just a start, with more individuals and
companies to be added later, and further trade sanctions could
follow. Germany's Bild newspaper said the initial EU list would
include at least 13 officials including top ministers and people
around Putin.
SHARES FALL, DEBT INSURANCE COSTS RISE
Russia's MICEX stock index was down 2.9 percent at 0930 GMT, having
lost more than 16 percent of its value in the two weeks since Putin
declared his right to invade. At one point in the morning it had
fallen 5 percent to its lowest since 2009.
The cost of insuring Russia's debt against default for five years
rose 18 basis points to 285 — a rise of nearly 7 percent — and is
now up by half since the crisis began.
Although Russian public opinion, fed by overwhelmingly
state-controlled media, is still solidly behind the plan to annex
Crimea, Western countries believe sanctions could undermine support
for Putin among the wealthy elite.
Goldman Sachs lowered its prediction for Russian economic growth for
this year to 1 percent from 3 percent on Thursday, blaming the
Ukraine crisis for sparking capital flight that will destroy
investment.
Former Finance Minister Alexei Kudrin told Russian media that the
threat of Western sanctions was already imposing higher borrowing
costs on Russian businesses and that further sanctions would push
capital flight to $50 billion a quarter.
Renaissance Capital estimated capital outflow in the first quarter
would exceed $55 billion, compared with $63 billion for the whole of
2013.
The ruble has declined only slightly despite the rout in share
prices, held aloft by a central bank that raised its lending rates
on March 3 and has been spending reserves to keep the currency from
falling.
Putin's March 1 declaration of the right to invade was accompanied
by demonstrations across the south and east by groups who raised
Russian flags, seized buildings and convened regional legislative
sessions demanding secession, in what Kiev called
Kremlin-orchestrated bids to repeat the Crimea scenario.
The most persistent pro-Moscow agitation has been in Donetsk, where
the Russian flag was flown above the regional government
headquarters for nearly a week and pro-Russian protesters occupied
the building for days. Their leader, who had declared himself
"people's governor" and demanded police report to him, was finally
arrested last week.
(Writing by Peter Graff; editing by Will Waterman)
Russia's stock markets tumbled and the cost of insuring its debt
soared on the last day of trading before pro-Moscow authorities in
Crimea hold a vote to join Russia, a move all but certain to lead to
U.S. and EU sanctions on Monday.
