The Ukrainian economy in tatters

The War Breaks The Spine of Ukraine's Economy

Ukraine was already limping along, but the Russia-backed separatist rebellion in the east has crippled its economy

By Maxim Eristavi

Maxim Eristavi is an independent writer based in Kyiv. He's been covering the 2014 Ukrainian revolution since the very first day and previously worked as CEO of Ukraine's first international news-radio station, Voice of the Capital, and as a journalist at Radio Free Europe/Radio Liberty.

[Graphic elements here https://medium.com/@MaximEristavi/the-war-breaks-the-spine-of-ukraines-economy-d752a776ce95]

What you need to know:

* Ukraine's hryvnia is in freefall, now the second-worst performing currency in the world

* Ukrainian economy is in the middle of a two year-long recession that is expected to deepen later this year

* Ukraine was already limping along, but the Russia-backed separatist rebellion in the east has crippled its economy. The country struggles to afford paying its war bills

In Kyiv, barely a day passes by without hearing of someone being laid off or getting their paycheck cut. Usual traffic jams have almost vanished, and on Saturday nights bars and restaurants are half-empty.

Post-revolutionary Kyiv

It's easy to spot the frustration of locals as they pass by currency exchange offices: the hryvnia is in free fall, having plunged to record 40 percent against the U.S. dollar this year. It's now the second-worst performing currency in the world-even than the Syrian pound is doing better.

Over the past half-year, Ukraine has gone through a bloody revolution, lost a chunk of its territory to Russia, and is now in the midst of its worst military conflict since the World War II. Funds have all but run out; the Ukrainian economy is collapsing under the weight of the war, and patriotism won't be enough to blunt the recession's impact.

"There are two news stories in today's world economy. First: Argentina announced a default, second - Ukraine didn't. And will never announce it", Ukrainian prime-minister Arseniy Yatsenyuk triumphantly boasted on July 31st after the parliament cleared the way for another $1.4 billion installment of an International Monetary Fund loan.

Ukrainian prime minister's triumphant speech after resignation rejected

In fact, when it comes to parallels between Ukraine and Argentina, economic data does not back up the government's optimism. True, both countries have seen three recessions in the past five years, and both are caught in a prolonged and dangerous inflation spiral. But this year Ukraine's GDP will fall 7 percent, prices will rise almost 20 percent, the local government and the IMF predict. Ukrainian economy shrank even further in the second quarter of 2014, new data shows. The recession has been ongoing for over two years, but this year's political crisis has severely worsened the country's economic woes. Ukraine was already limping along, but the separatist rebellion in the east has crippled its economy.

Earlier this year, the International Monetary Fund, backed by other financial institutions and foreign governments, threw Ukraine a $27 billion lifeline to avert a default. It is Ukraine's third aid package since 2008, and IMF chief Christine Lagarde suggested that Ukraine may need even more aid this year.

Exchange rates in Kyiv on August 13, 2014. Ukrainian hryvnia sinks to record lows against US dollar

On the world's financial markets, Ukrainian bonds are already junk-rated. They returned just 0.2 percent in July, one of the worst performances in all of eastern Europe-but not worse than Russian bonds. Now, analysts warn that the Ukrainian economic mess has clouded the outlook for all of Europe, right at the time when Eurozone recovery was finally speeding up.

Among ordinary Ukrainians, the impact of the downturn is acutely felt. Many put their businesses and careers on hold in order to help the Maidan revolution, but after that job was done, there was still no relief.

"Everyday I ask myself when is this crisis going to end? Months have passed, but I still cannot even make a wildest bet," Olga Ivanova, an owner of local event-agency, told me. One of the youngest leaders in this industry, she opened her first business a couple of years ago. Things were going well for her, until suddenly the market collapsed at the end of 2013 with the start of the revolution. "For months I was hoping for quick recovery right after the revolution. But then the war came and now I simply cannot afford to wait any longer," Ivanova says. She has had to merge her small company with a struggling competitor so that both can have a chance to survive.

Despite increasing economic pressure, many Ukrainians continue to donate as much as they can to support the Ukrainian army in its fight against pro-Russia rebels in the East. The government is scrambling to pay the bills for the war, so the army's poorly equipped soldiers depend on these donations.

On July 31, in a last-minute vote, Ukraine's parliament authorized an additional $743 million for the army, which otherwise would be left without a cent starting August 1. Lawmakers decided to finance these military expenditures with additional tax hikes, including a mandatory "war-tax" of 1.5 percent for all Ukrainians.

"If the Ukraine army enters our city, this will be the next Stalingrad"

That won't come close to covering all of the war's costs, however. To repair the war devastation in Eastern Ukraine, the country needs at least $600 million, according to the Finance Ministry. Kyiv has, at most, half of that, and the fierce fighting in the region continues.

Eastern Ukraine, utterly devastated by the war

Still, newly-elected president Petro Poroshenko and his government promise billions of dollars in pending foreign investments as soon as the war is over. Ukraine remains one of the hardest places in the world to do business, and crucial anti-corruption reforms have stalled. Prime Minister Arseniy Yatsenyuk's recent attempt to resign following tensions within parliament just highlights the political turbulence that Ukraine still cannot overcome. Parliamentary elections, scheduled for this October, will only lead to more political and economic uncertainty.

So after a popular uprising full of hopes and dreams for a better future, the deepening economic crisis has been a cold shower for Ukrainians. Literally.

Vitali Klitschko, the newly elected Kyiv mayor, announced on August 4 that he will cut off all hot water for the Ukrainian capital, at least through the end of September. This move, supported by municipalities all around the country, is supposed to save energy so Ukraine can survive the upcoming winter without depending on Russian gas. Without hot water, millions of low-income Ukrainians will suffer; the country still relies heavily on a Soviet system of energy-inefficient centralized heating.

Vitali Klitschko, the newly elected Kyiv mayor, announces on August 4 that he will cut off all hot water for the Ukrainian capital

The growing gas shortage could be the last red line for the Ukrainian economy. As major Ukrainian industries are also rolling out emergency plans to save on gas consumption and heating costs, analysts cannot imagine this happening without additional and significant output cuts. This will force Ukrainian economy in another deep dive, the one it have no strength to survive.

Ukrainian war back with a vengeance

Ukraine update - 26 May, 2014

Source; Demotix.com

Eastern Ukraine: The war rages on

A day after the elections and the war is back with a vengeance.

According to the Guardian president-elect, Poroshenkis promising to end the armed insurgency in the east of the country in "hours".

Kiev's forces launched air strikes on separatists during an intense battle to regain control of Donetsk airport.

However it seems according to latest information that according to claims on Twitter, that Donetsk self-defense forces have regained control over the international airport in the eastern city after Ukrainian troops launched a military operation there, deploying fighter jets and helicopters.

“The people’s army has the airport in Donetsk back under control. We are rooting out the remaining Kiev’s remaining troops. Airstrikes have stopped for now,” said the tweet from the self-proclaimed People’s Republic of Donetsk.

However, other reports on Twitter suggest shooting in Donetsk still goes on, now moving to the downtown

Ukrainian army shells Slavyansk residential area, 3 civilians killed

At least three civilians have reportedly been killed and several wounded when the Ukrainian Army launched a mortar attack on the town of Slavyansk in eastern Ukraine. One of the shells fell near a local teachers college, according to Ridus news portal.

Residential blocks were ruined as a result of the assault by Kiev's forces on Monday, the Ridus correspondent reported from the scene. At least two apartment blocks were damaged and “at least two people – a man and a woman – were killed,” the reporter sai

For more details GO HERE 

Here are images of the reality of war from photojournalist Petr Shelomovskiy

Source; Demotix.com

Source; Demotix.com

BBC coverage

For more details GO HERE

In the meantime reports are coming in that a rocket-propelled grenade fired by the Ukrainian army has hit a truck carrying wounded self-defense fighters near the Donetsk airport, killing a driver

“Only the driver was killed in the shelling. A few wounded were taken to the hospitals of Donetsk. But we don’t know if they received fresh wounds in the attack," the representative of the DNR said.

Earlier people’s governor of Donestk Region, Pavel Gubarev said in a post on Facebook the truck carrying the wounded was marked as an ambulance. He added that 15 more were wounded in the strike on the truck.

For details GO HERE

More shots of government helicopters attacking Donetsk airport

'Poroshenko has tough road ahead after winning Ukrainian election'

A look at the 'Chocolate King' 

And here is the western propaganda view

Poroshenko promises calm 'in hours' amid battle to control Donetsk airport

New president-elect says there will be no negotiations as Kiev launches air strikes on separatists at airport

the Guardian,

26 May, 2014

Ukraine's president-elect, Petro Poroshenko, promised to end the armed insurgency in the east of the country in "hours", as Kiev's forces launched air strikes on separatists during an intense battle to regain control of Donetsk airport.

With almost all the votes counted on Monday afternoon, Poroshenko, a pro-west businessman, was on course for a decisive victory with 54% of the vote, while his nearest challenger won just 13%, but when he takes up office he will be faced with the immediate task of bringing calm to Ukraine's eastern regions.

The pro-Russia forces who have occupied government buildings in eastern Ukraine said they were ready to negotiate with Ukraine's new leadership, but only with Russian mediation and on equal terms. The separatists have declared themselves de facto independent states and claim Kiev has no jurisdiction over them.

Less than a fifth of polling stations opened in the Donetsk and Luhansk regions on Sunday following a massive campaign of intimidation by the separatists, who say they want the eastern regions of Ukraine to join Russia after questionable referendums earlier this month.

But as the majority of Russian troops have now moved away from the border with Ukraine, the prospect of a Russian invasion or a Crimea-style annexation of the territory is unlikely.

Russia's foreign minister, Sergei Lavrov, said Moscow was ready to enter talks with the new leadership, in his country's first high-level response to Sunday's election. "We shouldn't miss the chance that we have now to establish an equal dialogue of mutual respect considering the vote that has taken place, the results of which Russia is ready to respect," Lavrov said.

Poroshenko has not backed off from the harsh tone struck by Kiev regarding the armed rebels in the two regions, repeating on Monday that there could be no negotiations with terrorists and comparing the pro-Russia militia men to Somali pirates. "Their goal is to turn Donbass into a Somalia where they would rule with the power of machine guns. I will never allow that to happen on the territory of Ukraine," he said.

He suggested that he would move quickly and decisively against the rebels: "The anti-terrorist operation cannot and should not last two or three months. It should and will last hours."

Any Ukrainian assault on the rebel strongholds of Slavyansk, or on Donetsk itself, is likely to be bloody, however. Late on Sunday night the first deputy prime minister, Vitaly Yarema, promised that Kiev's "anti-terrorist operation" would be renewed after a pause during the presidential vote.

Lavrov said the renewal of the anti-terrorist operation would be a "colossal mistake" and could threaten the resumption of dialogue.

The separatists took the initiative, however, seizing Donetsk airport on Monday morning, something they had not attempted before. This appeared to be a red line for Kiev, which responded with helicopter assaults. Fighter jets flew overhead and there was a chaotic exchange of automatic and grenade fire, as trucks of separatist fighters arrived at the airport from central Donetsk as back-up. The battle continued as evening fell, and the number of casualties was unclear.

Poroshenko said on Monday he would try to gain the trust of residents in the east, who have looked at the Kiev government and the Maidan movement that toppled the former president, Viktor Yanukovych, with extreme suspicion. He has promised that his first trip as president will be to eastern Ukraine. His inauguration is due in the first 10 days of June.

"We will try to win the trust of those who didn't vote for me," Poroshenko said. "Now the main mission is the unification of the state, the establishment of peace and the eradication of lawlessness."

The separatists, who already have the tacit support of many of the police in the region and have occupied the buildings of the security services in most towns, are becoming more audacious in their targets even as their grip on power appears to be waning. On Sunday, a group of armed men travelled to the mansion of oligarch Rinat Akhmetov, the richest man in Ukraine, who lives in Donetsk and many believe financed the separatist movements in its early days, a charge he has denied.

Whatever the history, it is clear that at least parts of the militia are not under control of the oligarch, who in the past fortnight has come out strongly in support of a united Ukraine.

"We are here for negotiations with Akhmetov," said Anton Kosenko, a self-styled MP of the Donetsk People's Republic, who was wearing a white suit and appeared to be in charge of a dozen fighters with automatic weapons and knives who were lazing on the grass outside the gates to Akhmetov's lavish residence. "The people are beginning to realise that the oligarchs who have been stealing from them for years are now also killing them, and it is time to rise up against them."

There are fears that the splintering rebel groups may start fighting each other, with tensions already visible.

"Without a Russian invasion, they are beginning to panic and are moving further into the depths of madness," said a Donetsk political insider. "They wanted to fight the fascists, but in the absence of fascists, they will start fighting each other."

Poroshenko called for negotiations with Moscow in the presence of international intermediaries. Lavrov said Russia was ready to work with the US and the EU on realising the roadmap drafted by the Organisation for Security and Co-operation in Europe to defuse the crisis. But he said Russia did not need an intermediary in its bilateral relations with Ukraine, especially not the former Georgian president Mikheil Saakashvili, as suggested by Poroshenko's ally Vitali Klitschko, the newly elected mayor of Kiev.

The president-elect promised to return Crimea to Ukraine, though this is likely to be a fruitless pursuit given the wave of patriotism in Russia that accompanied the annexation of the Ukrainian peninsula. A key point in any negotiations with Moscow will be the price at which Ukraine purchases Russian natural gas. Moscow has demanded Ukraine pay back billions of dollars it saved on a significantly reduced gas price under Yanukovych.

CNN about Ukraine election, May 26, 2014

Slavyansk

Images and Video from East Ukraine that the Corporate Media Will Never Show You

Today the provisional government in Kiev launched a military offensive against the eastern city of Slavyansk using tanks and helicopters, but the mainstream media will never show you what actually happened.

.

SCG News,

2 May, 2014

After having made statements this past week indicating that they were abandoning their attempts to crush the rebels in the east, today Kiev has made a surprise about face, launching a third military offensive against the separatist uprising in the eastern Ukrainian town of Slavyansk. So far it hasn't been going very well. All reports coming out of the city show that the rebels are still in control. Between 2 and 3 helicopters were shot down (reports vary), and the armored vehicles have been obstructed by crowds of unarmed civilians who met the soldiers outside the town. The photographs and video of the situation on the ground right now are quite striking, but you can rest assured that the corporate media in the West won't show you these.

Today the provisional government in Kiev launched a military 

A view from another angle:

Related: Kiev Admits it isn't in Control as Donetsk Announces Independence Referendum

And up close (the woman's sign reads "We are peaceful people"):

Related: Russia and China Announce Joint Naval Drills as NATO Declares Russia an Enemy

So why is Kiev making this hail Mary now? Because the IMF warned them that they will lose the $17 billion dollar bailout if Kiev loses control of the east.

Related: NY Times "Photos Link Masked Men in East Ukraine to Russia" Debunked

Sectarian conflict in Iraq

Attacks Stoke Fears of Violent Plunge in Iraq

Still No Signs of Sectarian Conflict Slowing Down

Anti-War,

18 August, 2013

Over a dozen bombings in a single hour made today another grim part of the month of August, the latest month of deadly violence which has left Iraq on the precipice of another sectarian civil war.

As with most other days, the attacks centered around attacking Shi’ite districts, and later in the day a round of bombings hit Sunni areas, with both sides blaming the sectarian divide on the other. 

Tensions are ever worsening, and while officials try to downplay individual days, the reality is that Iraq, more than any time since the US occupation, is a powderkeg waiting to explode.

99 people were killed nationwide, with 266 others wounded. Iraqi officials reiterated its “high alert” status, with concerns that the US attack on Syria could lead to more cross-border violence.

Violence has been steadily climbing since April, with July the single deadliest monthsince 2007. Though August isn’t over yet and there isn’t a final toll, today underscores that the situation is no better, and a bloody summer is quickly giving way to a bloody autumn for Iraqis, with no end in sight.

Hagel in Israel

US Defense Secretary: Israel to make its ‘own decision’ to attack Iran

US Defense Secretary Chuck Hagel acknowledges that while Israel and the US share a commitment to ensuring Iran does not acquire a nuclear weapon, there "may well be some differences" on the question of when it might decide to go for a bomb.

RT,

21 April, 2013

There is "no daylight at all" between the US and Israel’s stances on preventing Iran from acquiring nuclear weapon, he said. But there could be a divergence in evaluating the timing of the threat from Tehran.

Hagel’s latest visit to Israel has exposed a widely-known secret that the Obama administration has reasons not to get drawn into a new conflict.

But the high status of the major US ally comes with the necessity to sugarcoat the bitter pill.

Hagel has arrived in Tel Aviv with two pieces of news: good and bad.

The good news is he brought a multi-billion-dollar arms package that will enable Israeli military with Osprey V-22 tilt-rotor transport aircrafts, air tankers and anti-radar missiles to eliminate enemy air defenses.

The supply of the newest American weapons to Israel is designed to show Tehran that a solution by force of the Iranian nuclear problem remains on the table.

"I don't think there's any question that's another very clear signal to Iran,” Hagel told reporters on Sunday.

Because Israel has no common border with Iran, it would need to refuel its bombers and fighter jets to get to the Iranian airspace. Iran also has deeply embedded air defenses, so taking it out would imply anti-radar air-to-surface missiles.

The bad news is that despite Hagel saying the US and Israel regard the nuclear threat from Iran "exactly the same", there is a difference between Washington’s and Tel Aviv’s perception of the timing and necessity to attack.

“When you back down into the specifics of the timing of when and if Iran decides to pursue a nuclear weapon, there may well be some differences,” Hagel said.

On his first visit to Israel as Pentagon chief, Chuck Hagel delivered a message from the Obama administration that it is up to Israel to decide when to make a pre-emptively attack on Persians.

“Israel will make the decision that Israel must make to protect itself, to defend itself,” Hagel told reporters ahead of his Middle East voyage.

Which might as well mean that in case Israeli military action against Iran went wrong, direct US military assistance is not guaranteed.

“Iran is a threat — a real threat,” summed up Hagel, but pointed out that international economic sanctions have already become a tremendous pain for Tehran and that in turn would possibly influence the results of the Iran's presidential election in June. Therefore the implication of military force remains the last resort option.

It looks like Washington is paying its way out of a possible new slaughterhouse to evolve in the Middle East once PM Benjamin Netanyahu convinces Israeli generals to attack Iran at their own peril and risk.

The Israeli PM has been pressing the American authorities to launch an offensive on Iran for quite some time now – with no practical results. Possibly the last time Israel could rely on the US in attacking Iran for real was in 2008, but the war launched by Georgian President Mikhail Saakashvili in South Ossetia, close to the Iranian border, spoilt the game – if there was any.

Still, Hagel assured Tel Aviv that Israel's right of self-defense is not questioned.

“In dealing with Iran, every option must be on the table,” Hagel stressed in the interview given on an overnight flight to the Israeli capital.

Chuck Hagel, 66, started his week-long Middle East tour with visiting Israel for a reason. Not only because Israel is America’s principle ally in the region, but also because at the defense secretary’s confirmation hearing in February, the Republicans accused Hagel of showing insufficient support for the Jewish state.

US aid to Syrian jihadists

US to give $130m in military aid to Syria opposition: US official

The United States is set to give the militants fighting against the government of Syrian President Bashar al-Assad up to USD 130 million in military supplies, officials say

Press TV,

21 April, 2013

A senior US State Department official, speaking on condition of anonymity, said on Saturday that the US Secretary of State John Kerry will elaborate on the details of the US aid to Syria opposition during the meeting of the so-called Friends of Syria group in the Turkish city of Istanbul.

The meeting will take place later in the day and the leading members of the so-called Friends of Syria group including the United States, Britain, Germany, France, Saudi Arabia, and Qatar will attend the gathering.

The official also added that the military supplies include body armor, armored vehicles, night vision goggles and advanced communication equipment.

On Thursday, Kerry said the US would continue to aid the militants trying to overthrow the Syrian government, adding “We are working very, very closely with the Syrian opposition.”

Earlier this month, White House spokesman Jay Carney said in a briefing that Washington has provided over USD 115 million in nonlethal assistance to Syria opposition so far.

However, media reports have indicated that the US trains the foreign-sponsored militants in the crisis-hit country, in addition to coordinating arms shipments to them.

Syria has been experiencing unrest since March 2011 and many people, including large numbers of army and security personnel, have been killed in the violence.

The Syrian government says the chaos is being orchestrated from outside the country, and there are reports that a very large number of the militants fighting in the country are foreign nationals.

US increases support for foreign-backed militants in Syria: Kerry
US Secretary of State John Kerry says the United States has boosted its support for the foreign-backed militants in Syria.

Press TV,

21 April, 2013

Kerry made the remarks at a press conference held at the end of the so-called Friends of Syria conference in Istanbul, Turkey, on Sunday, saying the US would continue to provide assistance to the militants in Syria.

He said the US government decided to provide the militants in Syria with what he called a non-lethal package.

“For the last several months, we have steadily increased our non-lethal assistance to more than 127 million dollars,” Kerry said.

The new package, which would provide an additional $123 million aid to the militants, brings the total of US help to $250 million.

Media reports have indicated that the US trains the foreign-sponsored militants in the crisis-hit country, in addition to coordinating arms shipments to them.

Syria has been experiencing unrest since March 2011. Many people, including large numbers of Syrian army and security personnel, have been killed in the violence.

The Syrian government says that the chaos is being orchestrated from outside the country, and there are reports that a very large number of the militants are foreign nationals.

Damascus says the West and its regional allies including Qatar, Saudi Arabia, and Turkey are supporting the militants.

The Asia-Pacific region

US to deploy high-tech weapons to Asia-Pacific

Nimitz-class aircraft carrier USS Abraham Lincoln (CVN 72) transits through the Arabian Sea on April 5, 2012.

The United States will deploy its newest and high-tech military hardware including submarines and warships to its military bases in the Asia-Pacific region, a US military official says.

Press TV,

20 December, 2012

The official, speaking on condition of anonymity, said on Wednesday that the deployment will be part of a new US military strategy to increase its presence in the volatile region.

"What you're seeing is part of a bigger effort, the Pacific theatre will get the newest weapons systems first," he said.

P-8 submarine-hunting aircraft, cruise missiles, Virginia-class submarines, coastal combat ships and F-35 fighter jets are among the high-tech military equipment prepared to be sent to Asia-Pacific region in coming years, according to the official.

On Tuesday, Defense Secretary Leon Panetta also said the US plans to deploy the stealth F-35 fighter jets to the Iwakuni air station in Japan's Yamaguchi Prefecture by 2017. 

In June, the US announced plans to move the majority of its Navy warships to the Asia-Pacific region by 2020.

Speaking at an annual security conference in Singapore on June 2, Panetta said the Pentagon will deploy six more aircraft carriers and a majority of its cruisers, destroyers, submarines and littoral combat ships to the region by 2020. 

The US Defense Department will also deploy more sophisticated submarines and fighter aircraft, together with new electronic warfare capabilities and communications systems to the region.

While insisting it will take years to finish the transition, Panetta declared that Washington's budget problems and cutbacks will not hinder the new military strategy.

The US move is expected to increase tensions with China, as the shift in the US focus in the region is regarded by several critics as Washington's attempt to contain China's emergence as an international power.

Beijing has already expressed its dismay at any larger US presence in the Asia-Pacific region. In January, China's state media warned Washington against "flexing its muscles," saying that any US militarism would "endanger peace." 

Syria: Russians and Americans talk

It's a good few years since I last heard Russia referred to as a “super-power”

Russia, U.S. talk as Syria events "accelerate on the ground"

The two superpowers divided by Syria's civil war met head to head on Thursday, with signs emerging that Russia might curb its support for President Bashar al-Assad and Washington saying events were gathering speed on the ground.

,

Reuters,

7 December, 2012

U.S. Secretary of State Hillary Clinton met Russian Foreign Minister Sergei Lavrov in Dublin on the sidelines of a security conference, at a time when rebel advances have brought the 20-month war to the doorstep of the capital Damascus.

"Events on the ground in Syria are accelerating, and we see that in many different ways," Clinton said before the meeting. "The pressure against the regime in and around Damascus seems to be increasing."


Lakhdar Brahimi, the U.N. mediator who convened the meeting, said the two sides had not made any breakthroughs, but would seek a "creative" solution to their impasse.


Washington and its allies have long sought the overthrow of Assad, while Russia has shielded him at the U.N. Security Council. But comments by an ally of President Vladimir Putin on Thursday indicated Moscow may be losing patience with Assad.


Western countries and international officials have issued coordinated warnings in recent days to Assad not to use chemical weapons. In the latest, the United Nations said Secretary-General Ban Ki-Moon had written to Assad to urge him not to use poison gas.


U.S. officials say they have seen intelligence indicating Assad might be more likely to use chemical weapons, although they have been vague about the nature of the information.


"I think there is no question that we remain very concerned, very concerned that as the opposition advances, in particular on Damascus, that the regime might well consider the use of chemical weapons," Defense Secretary Leon Panetta said.
Syria has not signed an international chemical weapons treaty banning poison gas, but has repeatedly said that it would never use such weapons on its own people.


Assad's government said the warnings about chemical arms were aimed at whipping up an excuse for military intervention. NATO decided this week to send U.S., German and Dutch batteries of air-defense missiles to the Turkish border, meaning hundreds of American and European troops will deploy to Syria's frontier for the first time since the war began.

"Syria stresses again, for the tenth, the hundredth time, that if we had such weapons, they would not be used against its people. We would not commit suicide," Deputy Foreign Minister Faisal al Maqdad told Lebanon's Al Manar television, the voice of the pro-Assad Hezbollah movement.


"We fear there is a conspiracy to provide a pretext for any subsequent interventions in Syria by these countries that are increasing pressure on Syria."
As darkness fell in the embattled capital, the highway to Damascus international airport was closed by fighting, witnesses said. Rebels said they would not storm the airport but would encircle it to stop flights supplying the army.


Fighting has intensified around the capital in the past week, prompting Western commentators to speak of an "end-game" that could soon see Assad toppled soon.

CONSTRUCTIVE MEETING

A senior State Department official said Clinton's meetings with Lavrov and Brahimi were constructive, and U.S. and Russian officials would follow it up with another meeting with Brahimi in coming days, seeking a political transition in Damascus.


Brahimi said: "We have agreed that we must continue to work together to see how we can find creative ways of bringing this problem under control and hopefully starting to solve it."


In one of the clearest signs yet that Moscow may be losing patience with Assad, Interfax news agency quoted the head of President Putin's party in parliament as saying the Syrian government was no longer capable of funtioning.


"We have shared and continue to share the opinion that the existing government in Syria should carry out its functions, but time has shown that this task is beyond its strength," Vladimir Vasiliyev said.


Western countries have so far resisted conducting the sort of intervention in Syria's civil war that saw NATO air strikes help topple Libya's Muammar Gaddafi last year.


Germany approved the Patriot missile mission to Turkey on Thursday. NATO says it is a defensive step to prevent cross border strikes on alliance member Turkey, but Syria fears it could be a prelude to imposing a no-fly zone over its territory.


AIRPORT BLOCKADE


Rebel spokesman Abu Nidal said the army was pinned down along the airport highway by nightfall on Thursday by rebel fighters maneuvering to mount a blockade. The airport is not closed but commercial traffic has almost ceased.


"We know that arms have been going to the regime through the civilian airport," he said. A blockade would be "a good tool to put more pressure on the regime, which is part of strategy of trying to drain their strength".


Western powers have shown no enthusiasm for armed intervention in Syria, preferring economic sanctions, diplomatic pressure and limited aid to rebel forces, who get most of their guns and ammunition paid for by sympathetic Arab powers.
Britain said on Thursday it will increase practical support for the rebels to include training and equipment such as body armor and night-vision goggles. But they will not get the anti-aircraft and anti-tank missiles they are crying out for.


Exactly what Syria's army has done with suspected chemical weapons to prompt a surge of Western warnings over the past two days is not clear. Reports citing Western intelligence and defense sources are vague and inconsistent.


Clinton said on Wednesday Washington was concerned both about the possible use of chemical arms by "an increasingly desperate" Assad, and about the government losing control of such weapons to armed extremists - which could include rebels.


While Western countries support the rebel aim of toppling Assad, they are also uncomfortable with some rebel groups, which espouse radical Sunni Islamist views.


U.S. officials said the Obama administration was considering blacklisting Jabhat al-Nusra, an influential rebel group accused by other rebels of indiscriminate tactics that has advocated an Islamic state in Syria and is suspected of ties to al Qaeda.


An explosion at the Damascus headquarters of the Syrian Arab Red Crescent killed at least one person on Thursday, Syrian state television said. It blamed "terrorists from al Qaeda" - a term the government often employs to refer to rebel forces.


State news said a "terrorist" bomb exploded near a bakery in the Damascus suburb of Mezze 86, a district where many military families live and which has a large population of Alawites, the same sect as the President.


Opposition activists said army artillery pummeled several eastern suburbs of Damascus, where the rebels are dominant. Suburbs have been cut off for weeks from water and electricity, rebels say, accusing the government of collective punishment.


Residents of the cosmopolitan capital - until now largely spared the ravages of a war concentrated in the provinces and other cities - speak of a city under siege, with the sound of shelling becoming a constant backdrop.


Fighting was reported on Thursday in the rural outskirts of Damascus and in many parts of the country. A crucial supply line for the army, the Damascus-Aleppo road, was hit by clashes.


Rebels say they have also surrounded an air base 4 km (2-1/2 miles) from the centre of Damascus, a fresh sign the battle is closing in on the Syrian capital. Maqdad denied that: "What is sad is that foreign countries believe these repeated rumors."


Rebel and state claims about the military situation cannot be verified independently.