SEVASTOPOL / DONETSK, Ukraine (Reuters) — Dozens of Russians linked to Russia's gradual takeover of Crimea could
face U.S. and EU travel bans and asset freezes on Monday, after six
hours of crisis talks between Washington and Moscow ended with both
sides still far apart.
Moscow shipped more troops and armor into Crimea on Friday and
repeated its threat to invade other parts of Ukraine in response to
violence in Donetsk on Thursday night despite Western demands to
pull back.
EU diplomats will choose from a long list of 120-130 possible
Russian targets for sanctions on Sunday, as pro-Moscow authorities
who have taken power in Crimea hold a vote to join Russia in the
worst East-West confrontation since the Cold War.
Several diplomats dismissed a German newspaper report that said the
list would include the heads of Russia's two biggest companies,
energy giants Gazprom and Rosneft.
U.S. Secretary of State John Kerry said Russia would be guilty of a
backdoor annexation of Crimea if its parliament ratified the Crimea
referendum, which is taking place after an armed takeover of Crimea
and gives voters no chance to say "no".
He has warned Moscow that U.S. and EU sanctions could be imposed as
soon as Monday, although U.S. officials said after Kerry's marathon
meeting with Russian Foreign Minister Sergei Lavrov in London on
Friday the door was still open for more talks.
Lavrov played down his own ministry's threats, saying Moscow had no
plans to invade Russian-speaking eastern Ukraine, where pro-Moscow
groups have occupied some government buildings.
But he said Russia would respect the referendum result. Preliminary
partial results are expected late on Sunday, with final results on
Tuesday.
STOCK MARKET FALLS
Russia's stock markets tumbled and the cost of insuring its debt
soared on the last day of trading before the Crimea vote. Brent
crude oil rose by more than $1 as traders worried the crisis was set
to escalate.
Foreign holdings of U.S. Treasuries have also plunged this week,
leading some traders to speculate Russia has cut its dollar reserves
to support the ruble and avoid any sanctions.
An EU diplomat said he expected the final list of those who could be
sanctioned on Monday to be between "tens and scores" of people from
the list, which runs to five pages.
Germany's Bild newspaper reported that Alexei Miller, boss of
natural gas monopoly Gazprom, and Igor Sechin, head of Russia's
biggest oil firm, Rosneft, would be among those targeted, along with
senior ministers and Kremlin aides.
Reuters was not immediately able to confirm the Bild report and
European diplomats said the choice had not yet been made and was
unlikely to include business leaders.
"(Business interests) is not the target initially, the focus is on
the political decision that has been taken to act in Crimea and
destabilize Ukraine," said one diplomat involved in the
negotiations.
Rosneft spokesman Mikhail Leontyev said sanctions on his firm's boss
would be "stupid, petty and obvious sabotage of themselves most of
all. I think it will primarily affect Rosneft's business partners in
the West in an extraordinary way." Gazprom and the Kremlin declined
to comment.
FELLOW CITIZENS
A U.N. Security Council resolution drafted by the United States
declaring that the referendum "can have no validity" will be put to
a vote on Saturday. Russia is expected to veto it but Western
diplomats hope China will isolate Moscow by abstaining.
Kerry told Lavrov Russia should explain its intentions for the large
number of Russian forces massing on the eastern border with Ukraine,
where many ethnic Russians live, and in Crimea.
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, alluding to what it says are threats
from Ukraine's new pro-Western leaders.
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 and the new pro-Western governor of Donetsk said
Russians were behind the clashes.
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
reporter 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.
In nearby Simferopol, around 300 Tatars protested against the
referendum. Tatars, a majority in Crimea until Soviet leader Josef
Stalin deported them en masse for alleged collaboration with the
Nazis in World War Two, are strongly anti-Russian.
FACTS ON THE GROUND
Russian troops seized the Black Sea peninsula 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.
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.
The Defense Ministry said 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 on Russian officials and other figures are now
seen as inevitable. A formal EU decision to impose sanctions will be
taken on Monday unless Moscow rapidly changes course.
U.S. and European officials say the targets will not include Putin
or Lavrov, and an east European diplomat said the EU might impose
sanctions on one set of people on Monday, and add others on
Wednesday and during an EU summit on Thursday and Friday.
"It could start by sanctioning those directly involved with the
situation in Crimea. Then if Russia doesn't respond, expand to
include senior figures in the Russian Senate, and then ultimately
expand to include very senior people," the diplomat said.
Bild's list included Defense Minister Sergei Shoigu, Deputy Prime
Minister Dmitry Rogozin, presidential administration chief Sergei
Ivanov and the secretary of the National Security Council, Nikolai
Patrushev.
SHARES FALL, DEBT INSURANCE COSTS RISE
Russia's MICEX stock index has lost more than 16 percent of its
value in the two weeks since Putin declared his right to invade. The
cost of insuring Russia's debt against default 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.
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 fall 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.
(Writing by Peter Graff and Philippa Fletcher;
editing by Will
Waterman, Giles Elgood and Sonya Hepinstall)
