Ukraine update - 03/10/2014

Pro-Russia Troops Install Minefields, Border Markers in Crimea; Gazprom Ups Price of Natural Gas 37%, Calls in $2 Billion Gas Debt

Mish's Global Economic Analysis

9 March, 2014

The takeover of Crimea by Russia is nearly complete. All that remains is the final vote on March 16. There would not be a vote if the outcome was uncertain.

Troops Install Minefields, Border Markers in Crimea

Bloomberg reports Pro-Russia Forces Occupy Ukraine as Separatist Vote Looms. 

 Pro-Russian forces advanced in Ukraine’s Crimean peninsula, ignoring Western calls to halt a military takeover before the region’s separatist referendum. The U.S. estimates Russia now has 20,000 troops confronting a smaller Ukrainian force there. Ukraine has stepped up its eastern border defenses in the worst standoff between it and the West since the Cold War.

Pro-Russian units planted minefields in the Kherson region, north of Crimea on Ukraine’s mainland, and began to install border markers between the two regions, news website Khersonskie Vesti reported today. Ukraine’s border control service said Russian forces now control 13 border bases as well as the ferry crossing across the Kerch Strait to Russia, preventing guards from inspecting trucks arriving in Crimea.

Authorities on the peninsula ordered an anti-aircraft regiment in the city of Yevpatoriya to lay down its arms or its base would be taken over, news service Interfax reported.

The peninsula, where Russian speakers comprise a majority, will join Russia once parliament in Moscow passes the necessary legislation and there’s nothing the West can do, according to Sergei Tsekov, the deputy speaker of Crimea’s parliament.

“There’s no comeback, and the U.S. or Europe can’t impede us,” Tsekov said by phone on March 7 from Moscow, where he met Russian officials to discuss the region’s future. “Crimea won’t be part of Ukraine anymore. There are no more options.”

The U.S. and European allies will impose sanctions if there isn’t a quick resolution, Obama said at the White House on March 6.

Russia Calls in $2 Billion Gas Debt, Gazprom Ups Price of Natural Gas 37%.

A Bloomberg video claims Russia Calls in $2 Billion Gas Debt. In addition, Ukraine Sees Gazprom Charging 37% More for Gas in Second Quarter. 

 Ukraine faces a 37 percent increase in the price it pays for Russian natural gas after OAO Gazprom canceled a discount and threatened to cut supplies, Ukrainian Energy Minister Yuri Prodan told reporters today.

Ukraine will pay about $368.50 per 1,000 cubic meters of the fuel in the second quarter, Prodan said. Russia agreed last year to cut the price it charges Ukraine to $268.50. Gazprom rescinded the discount last week and said Ukraine risks a repeat of 2009, when the Moscow-based company reduced shipments during a pricing dispute.

Ukraine needs to import about 30 billion cubic meters of gas this year, of which a third may come from Slovakia, Prodan said March 5. Gazprom said March 7 in a statement it’s owed $1.89 billion by Ukrainian state gas company NAK Naftogaz Ukrainy for supplies already received.

Minimal Sanctions

It is likely the US issues some sanctions. They probably will not be meaningful. as noted on March 5, Russia Has Upper Hand in Ukraine, No Meaningful Sanctions Coming. 

 It was easy enough to impose sanctions on Iran because there was no meaningful trade with Iran other than oil. And global oil supply can come from anywhere.

Secondly, and unlike the US which has little trade with Russia, Germany, the UK, and other European countries do have meaningful trade with Russia.

Finally, Germany gets 30% of its natural gas supply from Russia. Impose severe sanctions and Russia can shut down those supply lines, most of which happen to run through Ukraine.

Obama can pretend to put down a tough stance, but don't expect any meaningful reaction globally. Events are already firming up along those lines.

Germany and the UK already rejected major sanctions. Europe gets much of its natural gas from Russia and hoarding supplies is now underway.

See Natural Gas Hoarding in Europe Thanks to US Sanction Proposals; Boehner vs. McCain; LNG the Solution.

The chart is from Gazprom and Morgan Stanley.

It is mathematically impossible to be more than 100% dependent on a supplier, at least over the long-term. Certainly, for short periods of time imports can exceed usage, but over the long haul they cannot.

That said, I do not know the timeframe for the chart. It's possible the chart is reflective of recent hoarding.

Regardless, the chart shows the huge dependencies some European countries have for Russian natural gas.

I feel sorry for those who will soon be living in a nation they do not feel part of. But there is little that can be done about it.  

Read more at http://globaleconomicanalysis.blogspot.com/2014/03/pro-russia-troops-install-minefields.html#KiVSVg021yLqJ7pi.99

Details of sanctions against 

Russia to be finalised in 

London

David Cameron indicates asset freezes and travel bans will be imposed within days as tensions continue to escalate inCrimea

the Guardian,

10 March, 2014

Western officials will meet in London on Tuesday to identify Russians who will be subject to asset freezes and travel bans that officials hope will persuade Moscow to withdraw its presence from Crimea.

The sanctions, which the British prime minister, David Cameron, indicated would be imposed within days, come as tensions escalate in the Crimean peninsula, where unidentified men reportedly fired warning shots as they moved into a Ukranian naval base on Monday.

In Washington, the White House gave its strongest indication yet that Russia is effectively being thrown out of the G8 group of industrialised nations on Monday, and insisted the world community would refuse to accept the results of a Crimean referendum later in the week.

Barack Obama's press secretary, Jay Carney, said: "It is hard to see the G8 [summit] happening", in Sochi in June.

Carney said a referendum in Crimea, scheduled for Sunday, "would not be legal under Ukraine's constitution and therefore would not be accepted by the United States and its international allies and partners".

There is concern in the US and Europe that Sunday's referendum could mark a dangerous turning point in the Ukraine crisis, enabling the Russian president, Vladimir Putin, to increase Russia's presence in the peninsula, claiming to be protecting Crimean's right to self-determination.

European foreign ministers are expected to make a final decision about sanctions next Monday – the day after the referendum.

Nato announced on Monday night it will deploy AWACS reconnaissance aircraft to overfly Poland and Romania as part of alliance efforts to monitor the crisis.

The flights "will enhance the alliance's situational awareness," a Nato official said, adding: "All AWACS reconnaissance flights will take place solely over Alliance territory."

The latest in a series of low-level confrontations involving pro-Russian forces and the Ukranian military in Crimeaon Monday involved 10 unidentified armed men who reportedly fired in the air at a Ukrainian naval post.

Ukraine's Channel 5 television quoted defence official Vladislav Seleznyov as saying the shooting took place at a motor pool base near Bakhchisaray. The men in two minibuses drove into the compound and demanded Ukrainian personnel there give them 10 trucks.

There have been several similar incidents in recent days, as Russian forces appear to be testing the resolve of Ukrainian forces in Crimea, avoiding the kind of confrontation that results in bloodshed.

The US and Europe are seeking to tighten the noose on Moscow with sanctions, while maintaining top-level discussions and insisting there is a way in which Putin can change course.

All G8 countries except Russia – a separate group commonly known as G7 – have previously announced suspension of preparatory meetings, but so far have held back from cancelling the summit itself.

"No one is preparing for the G8 right now because of the actions Russia has taken," Carney said on Monday. "We'll see how this transpires, but absent any preparation it hard to see the G8 happening."

If the G8 summit is cancelled in June, or hosted in a different country, it would effectively mean Putin had been thrown out of the club of powerful world leaders.

The US is planning to use a visit to Washington on Wednesday by Ukraine's prime minister, Arseniy Yatsenyuk, to shore up the legitimacy of Kiev's nascent government. Yatsenyuk will also give an address to the United Nations in New York.

In Washington, there have been questions over whether Britain and Germany are committed to holding Putin to account given both countries' economic ties with Russia. Europe is viewed to be particularly hampered by its reliance on Russian gas.

Carney also played down reports that Moscow could restrict gas exports to Ukraine or other parts of Europe in a retaliation against US-led sanctions.

European leaders have been rapidly exploring ways in which they could counteract any such move by Putin, including reversing the flow of gas in pipelines in the continent, pumping supplies into Ukraine from western Europe.

"European gas inventories are way above normal levels due to a milder than usual winter in Europe, and could replace a loss of Russian exports for several months, if necessary," Carney said.

But he added any move to starve Europe of gas would by a "lose-lose situation for everyone, most particularly for Russia".

"Russia has a substantial financial interest in maintaining those exports," Carney said.

Crimea creates own military 

by swearing in self-defense 

units

RT,

10 March, 2014

Volunteers from self-defense units are taking an oath of allegiance to the people of Crimea as the autonomous republic puts together its own military in order to respond to possible provocations from the coup-imposed government in Kiev.

Around 180 Crimean citizens have already joined the local army, as oaths were taken in the republic’s capital of Sevastopol on Monday and Saturday.

All of the recruits were “carefully checked because they will be handed weapons,” Aleksandr Bochkarev, head of the Crimean self-defense forces, told RIA-Novosti.

“They have already proven themselves in the people’s militia of Crimea. Each of them had previously served either in the military or in the law enforcement agencies. All of them are fit for military service and possess the necessary skills,” he said.

The ceremony took place in front of the eternal flame in a Simferopol park named after the first man in space, Yuri Gagarin.

According to Bochkarev, similar oaths will take place in the Crimean peninsula on a regular basis. 
“We’re shaping up our own armed forces now,” the commander stressed. “After the referendum (on Crimea’s fate as part of Ukraine) – if the affiliation with Russia begins – some of the guys will remain in service, but some will, possibly, want to quit or won’t fit on some criteria.”

A soldier outside the Crimean legislature building in Simferopol. (RIA Novosti/Andrey Stenin)

The 1,500 Crimean citizens that currently make up the Crimean self-defense forces “isn’t much, but we don’t need more,” he said. 
“New people call or come every time, asking to recruit them into the self-defense units, but for now we only gather contact information and send everybody home,” Bochkarev explained.

Crimean Prime Minister Sergey Aksyonov, told Itar-Tass that all of the members of the self-defense forces will be sworn in, as it will be their duty to maintain order during the referendum on March 16.

In addition to the self-defense units, the majority of Ukrainian armed forces dispatched to Crimea have switched to the side of local authorities.

Rear Admiral Denis Berezovsky – head of the Ukrainian Navy and the first person to swear allegiance to the Crimean people – was followed by the local commanders of police, emergencies ministries, border guards, and other top security officials.

Meanwhile, coup-imposed Prime Minister Arseny Yatsenyuk has made a desperate attempt to win back the loyalty of the Ukrainian military in Crimea by promising a bonus of 125 million hryvnas (around US$13.6 million) to the servicemen “as soon as possible.”

But the announcement wasn’t welcomed by everybody in Yatsenyuk’s own Finance Ministry, which is currently experiencing a severe lack of funds.

A military man in a Simferopol street. (RIA Novosti/Andrey Stenin)

“Due to the acute shortage of money in the treasury, we asked a question: Which expenditure item should we cut? However, no response followed,” an unnamed source in the Ukrainian Finance Ministry told Itar-Tass.

According to the source, social budget items like unemployment benefits, child allowances, and studentships are most likely to be the first to suffer if the soldiers are paid.“But, in the current situation, these funds won’t be enough. So it’s possible that some money will be withdrawn from the Health ministry’s accounts. However, we haven’t yet been given such an order,” he added.

One of the members of the Ukrainian coup-imposed government pointed out to Itar-Tass that Yatsenyuk’s pledge to give the money to the military is rather “blurry,” as the exact dates for the move were never voiced.

He suggested that the announcement may well be aimed at diverting the attention of the military in Crimea from a more serious problem, as their allowances are the first to be frozen by Kiev.

The source also stated that according to his information, “the morale of the Ukrainian personnel in Crimea is in a depressed state. The protest moods among the servicemen are on the rise. The number of defectors is growing.” 
“The military hasn’t been paid for over a month. There are also food shortages,” the unnamed minister stressed.

Escobar: Kiev coup is tequila 

sunrise revolution with neo-

Nazi flavor

A referendum in Crimea will say in a week if the region wants more autonomy from Kiev, or if it sees itself a part of Russia. To discuss the upcoming vote, RT speaks to foreign affairs journalist, Pepe Escobar.

Russian Troops Open Fire In Crimea, Reuters Reports As Kerry Delays Russia Visit

That Ukraine "drill" may be coming at just the right time. Just out from Reuters:

• RUSSIAN TROOPS OPENED FIRE DURING TAKEOVER OF UKRAINIAN MILITARY POST IN CRIMEA, NO ONE WOUNDED -INTERFAX QUOTES UKRAINIAN BASE COMMANDER

More:

Russian troops opened fire with automatic rifles during a takeover on Monday of a Ukrainian naval post in Crimea, Interfax news agency quoted a Ukrainian officer as saying.

The unnamed officer from the motor vehicle battalion of the Ukrainian navy said Russian troops broke in to the base near the inland town of Bakhchisaray some time after 2 p.m. (noon GMT), took mobile phones from the Ukrainians and began trying to remove vehicles. None of the Ukrainian troops was hurt and the base commander was trying to negotiate an end to the action.

Further details were not immediately available. Russian forces who have taken control of a number of military installations across the Black Sea peninsula have not so far exchanged fire in anger with Ukrainian troops.

And at the same time:

• RUSSIA'S PUTIN SAYS TOLD FOREIGN MINISTER LAVROV TO INVITE U.S. COUNTERPART KERRY FOR MORE CONSULTATIONS ON UKRAINE
• RUSSIAN FOREIGN MINISTER LAVROV SAYS HAD INVITED KERRY TO RUSSIA TODAY, BUT KERRY SAID ON SATURDAY HE WOULD LIKE TO POSTPONE VISIT
• RUSSIA'S LAVROV SAYS RUSSIA HAS OWN PROPOSALS TO RETURN UKRAINIAN SITUATION TO THE FRAMEWORK OF INTERNATIONAL LAW, TAKING INTO CONSIDERATION INTERESTS OF ALL UKRAINIANS

No de-escalation yet. Any minute now though. The market said so.

http://www.zerohedge.com/news/2014-03-10/russian-troops-open-fire-crimea-reuters-reports-kerry-delays-russia-visit


There is NO way the Russians are going to let extremists from Euro-Maidan cross over to Crimea to foment trouble

Confrontation in Ukraine as diplomacy stalls

Reuters,

10 March, 2014

A pro-Russian force opened fire in seizing a Ukrainian military base in Crimea on Monday and NATO announced reconnaissance flights along its eastern frontiers as confrontation around the Black Sea peninsula showed no sign of easing.

Ukrainian activists trying to cross into Crimea to show solidarity with opponents of last week's Russian military takeover there said they were halted by men in uniforms of the now outlawed riot police. One of these fired at close range, hitting a man in the chest, apparently with rubber bullets.

With diplomacy at a standstill, Russia said the United States had spurned an invitation to hold new talks on resolving the crisis, the worst East-West standoff since the Cold War - although Washington said later a meeting of foreign ministers was possible this week, if Moscow shows it is ready to "engage".

The U.S.-led NATO defense alliance said AWACS early warning aircraft, once designed to counter feared Soviet nuclear missile strikes, would start reconnaissance flights on Tuesday over Poland and Romania to monitor the situation in Ukraine, flying from bases in Germany and Britain.

The United States on Tuesday will also begin previously planned military training exercises in the region, the first since the Russian intervention in Crimea. A U.S. Navy destroyer will participate in maneuvers with Romanian and Bulgarian warships in the Black Sea, across from Crimea. In Poland, U.S. fighter jets will take part in joint exercises.

British Prime Minister David Cameron told Germany's Bild newspaper, however, that Western powers were not considering military action and wanted a diplomatic solution. European Union governments are considering sanctions against Russia.

Ukrainian Prime Minister Arseny Yatseniuk, who said he would address the U.N. Security Council on Thursday, blamed the crisis on Russia and accused Moscow of undermining the global security system by taking control of Crimea.

Ukraine's new justice authorities issued warrants for the arrest of Crimea's pro-Russia leaders on Monday, six days before a referendum they have called to join the region to Russia.

Russian forces have in little more than a week taken over military installations across Crimea, home to the Russian Black Sea Fleet and Russian territory until Soviet leader Nikita Khrushchev gave it to Ukraine in 1954.

Pro-Russian separatists have taken control of the regional parliament, declared Crimea part of the Russian Federation and announced a referendum for Sunday to confirm that.

President Vladimir Putin says Moscow is acting to protect the rights of ethnic Russians, who make up a majority of Crimea's population, after Ukraine's president, Viktor Yanukovich, was ousted last month in what Russia calls a coup.

BASE TAKEOVER

On Monday, a Ukrainian defense official said a Russian-led military force of about a dozen men fired in the air as they took control of a Ukrainian naval base near the town of Bakhchisaray, though no one was hurt.

The force was accompanied by the base's Ukrainian commander. He persuaded a number of his men to join the Russian forces while allowing others who refused to leave, the Ukrainian official, Vladislav Seleznyov wrote on Facebook. The Russian force later drove off with nine Ukrainian vehicles.

Yarik Alexandrov, one of the Ukrainian naval personnel who refused to pledge allegiance to Moscow, told Reuters near the base that he and his comrades at first refused to surrender. "Then they started shooting round our feet and we surrendered," he said. "What could we do? We had no weapons."

Similar small confrontations have taken place at other Ukrainian bases around Crimea, although shooting has been rare and there has so far been no bloodshed. Russia denies its troops are involved - a stance ridiculed in Kiev and the West.

In a sign of the peninsula's growing isolation from the Ukrainian mainland, armed men prevented a convoy of cars from a Ukrainian activist group crossing into Crimea.

The group was part of the Maidan movement behind the protests that forced Yanukovich to flee to Russia. Ukrainian television showed men in the uniform of the Berkut riot police, banned by the new authorities for its role in shooting dozens of demonstrators in Kiev last month, blocking the road south.

One was shown firing twice, hitting a man in the chest. His injuries appeared minor, suggesting the use of rubber bullets.

In other armed action, Russian forces took over a military hospital and a missile unit. Reuters correspondents also saw a big Russian convoy on the move just outside the port city of Sevastopol near a Ukrainian air defense base.

It comprised more than 100 vehicles, including around 20 armored personnel carriers, plus mobile artillery.

CHANCE OF TALKS SPURNED

Putin says Russia is not controlling events in Crimea, but denials of Russian involvement are rejected by the United States as the two former Cold War enemies wage a geopolitical battle over the future of Crimea and Ukraine.

Russian Foreign Minister Sergei Lavrov told Putin that Russia's position on Ukraine remained at odds with the West, but U.S. Secretary of State John Kerry had declined an invitation to visit Russia on Monday for further talks.

"It is all being formulated as if there was a conflict between Russia and Ukraine ... and our partners suggested using the situation created by a coup as a starting point," Lavrov told Putin during talks in the Black Sea resort of Sochi.

He did not say why Kerry had postponed the talks.

The State Department said Kerry told Lavrov on Saturday that Washington wanted Moscow to cease its drive to annex Crimea and end "provocative steps". In a statement, it added: "Kerry made clear to Foreign Minister Lavrov that he would welcome further discussions focused on how to de-escalate the crisis in Ukraine if and when we see concrete evidence that Russia is prepared to engage on these proposals."

In Kiev, Yatseniuk said he would address the U.N. Security Council during a debate on Ukraine. He is also due to hold talks with the U.S. government that will show Washington's support of the new Ukrainian leadership.

"Russia's policy is aimed at undermining the basis of the global security system and revising the outcome of World War Two," Interfax quoted Yatseniuk as telling reporters.

Western powers have rallied behind Ukraine's new leaders and the World Bank said on Monday it planned to provide up to $3 billion this year to see Kiev through an economic crisis.

U.S. senators are preparing legislation that aides said would be broader than a measure passed last week by the House of Representatives backing $1 billion in loan guarantees for Ukraine, and could include sanctions.

Ukraine's crisis was triggered in November by Yanukovich's refusal, under Russian pressure, to sign deals on closer political and trade ties with the European Union.

Although three months of protests against Yanukovich were mostly peaceful, at least 80 demonstrators were killed in clashes after police used force against them, some by sniper fire.

Yanukovich fled Ukraine before a peace deal with the opposition was implemented, and a new national unity government was installed. He is wanted for mass murder in Ukraine and is being sheltered by Russia.

WEST DOES NOT RECOGNISE REFERENDUM

Western countries have denounced the Russian intervention in Crimea and say the borders of Ukraine, a country of 46 million, should remain unchanged. They have said they will not accept the outcome of Sunday's vote.

"The United States is not prepared to recognize any result of the so-called referendum taking place in six days' time," U.S. Ambassador Geoffrey Pyatt said in Kiev. "We are committed to Crimea's status as part of Ukraine. The crisis needs to be solved diplomatically, not militarily."

In the latest military movements, in Sevastopol, where Russia has its Black Sea Fleet base, Russian forces disarmed servicemen at a Ukrainian army missile base, Seleznyov said.

He told Fifth Channel television that about 200 soldiers aboard 14 trucks moved on the building at about 1.30 a.m and threatened to storm it if the Ukrainian soldiers failed to give up their weapons.

In the eastern city of Luhansk, Ukraine's security services said they were investigating the takeover on Sunday of the main administrative building. The region's top official was held captive in a room where he was made to write a letter saying he had resigned, but he later said he was still performing his duties.