The top U.S. and U.K. diplomats vowed to punish Russia with industrywide sanctions if this month's Ukrainian presidential election is undermined as the Kiev government's forces moved to flush out separatists in the east.
"If Russia or its proxies disrupt the elections," the U.S. and its allies "will impose sectoral economic sanctions as a result," Secretary of State John Kerrysaid in London yesterday after meeting his counterparts from Britain, Italy, France and Germany. Pro-Russian separatists "are literally sowing mayhem," seeking to "speak for everyone through the barrel of a gun."
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Discord over the election risks another round of escalation as the Kiev government and its U.S. and European allies blame Russia for the unrest in Ukraine's easternmost regions. Russian calls to include rebels in national unity talks that began May 14 were rejected as the meetings opened without separatist leaders' participation.
In eastern Ukraine, government troops eliminated two rebel bases near the towns of Slovyansk and Kramatorsk, acting President Oleksandr Turchynov said yesterday. Militants vowed to expel the military from the region.
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‘Adequate Answer'"The anti-terrorist operation can stop after weapons are surrendered and hostages released," Turchynov said in parliament in Kiev. "We're conducting dialogue with those who're prepared for conversation and cooperation. We're working on changes to the constitution to expand powers to local self-government. At the same time, those who conduct war will receive an adequate answer."
Russia's benchmark Micex Index of stocks was up 0.1 percent at 1:03 p.m. in Moscow. It's dropped 4.3 percent since the start of President Vladimir Putin's intervention in Crimea on March 1. The ruble lost 0.1 percent to 34.7980 versus the dollar. Ukraine's hryvnia, which has lost 31 percent against the U.S. currency in 2014, declined 1 percent today, data compiled by Bloomberg show.
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The United Nations high commissioner for refugees, Navi Pillay, said today a report produced by her 34-strong monitoring team in Ukraine shows "an alarming deterioration in the human rights situation in the east of the country."
Targeted KillingsThe monitors criticized "repeated acts of violence against peaceful participants of rallies, mainly those in support of Ukraine's unity" as well as "targeted killings, torture and beatings, abductions, intimidation and some cases of sexual harassment –- mostly carried out by well-organized and well-armed anti-government groups in the east."
Russia's Foreign Ministry said on its website the report wasn't objective and used double standards.
Even as the U.S. and the European Union threaten more sanctions after the May 25 election, Russian Foreign Minister Sergei Lavrov has said it's "ridiculous" to hold his country's government responsible.
While Lavrov said May 14 that Ukraine's slide into a civil war is making legitimate voting impossible, Kerry appealed yesterday to separatists to take part in the ballot and engage in national dialogue as "the best way to de-escalate the situation."
Death TollDozens of people have been killed and more than 100 kidnapped in eastern Ukraine since separatist unrest flared after Russia's annexation of the Crimean peninsula in March.
The situation in the Donetsk region is worsening, with the sound of gunfire constant in Slovyansk and the surrounding district, television service knocked out and public transport not functioning, the governor's office said in a statement yesterday. Tensions have engulfed 15 towns and cities in the region, according to the statement.
Ukraine's security service announced today a group of rebels had been detained on the way to Slovyansk for organizing unrest in the southwestern port city of Odessa. The group acted on Russian orders, it said on its website.
Ukrainian Social Policy Minister Lyudmyla Denisova said in parliament the government would no longer be able to provide welfare payments to residents in the Donetsk and Luhansk regions, where unofficial ballots last weekend backed a breakaway from Kiev, because of the security situation.
Separatists in Luhansk and Donetsk have agreed to join forces to confront the central government. Rebels fighting for the self-proclaimed Donetsk People's Republic said yesterday that they'll "burn and wipe out" Ukrainian forces unless they withdraw from the region.
‘Real War'"When Ukrainians kill Ukrainians, I believe it's as close to civil war as you can get," Lavrov told Bloomberg Television May 14. "In the east and south of Ukraine, there is a war, a real war, with heavy weaponry used."
Even so, in the eastern port city of Mariupol, rebels and police agreed to end fighting under an agreement brokered by Metinvest Holding LLC, the company said on its website. Metinvest, controlled by Ukraine's richest man, Rinat Akhmetov, runs iron and steel plants in Mariupol.
At the roundtable talks in Kiev, Prime Minister Arseniy Yatsenyuk said ending the crisis requires an international conference in Geneva, which Ukraine, Russia, the EU and the U.S. should attend.
While Putin promised last week to move soldiers back from Ukraine's border, NATO says this hasn't happened. Russia has no intention to send troops to eastern Ukraine, Lavrov said.
Sanctions PlansThe U.S. and the EU have already penalized 98 people and 20 companies over Russia's actions in Ukraine. Should it interfere in the planned election, Russia will face punitive measures targeting entire industries, which may include energy, banking, defense and mining, according to a U.S. official who asked not to be identified following diplomatic protocol.
The U.S. and its European allies agreed that industrywide sanctions would come next, the official said.
"Russia's attitude and behavior toward those elections will be the determining factor in whether we need to apply widening sanctions," U.K. Foreign Secretary William Hague told reporters in London yesterday. "We can't give and wouldn't want to give an exact definition" of what would trigger those measures, he said. "If we set a red line, Russia knows it can go up to that red line."
To contact the reporters on this story: Indira A.R. Lakshmanan in London atilakshmanan@bloomberg.net; Robert Hutton in London at rhutton1@bloomberg.net; Kateryna Choursina in Kiev at kchoursina@bloomberg.net
To contact the editors responsible for this story: Balazs Penz at bpenz@bloomberg.net Eddie Buckle, Andrew Langley