Bloomberg News

Ukraine Peace Talks Progress as Evacuation Route Set Up

June 10, 2014

Russia's Ambassador To Ukraine Mikhail Zurabov

Mikhail Zurabov, Russia's ambassador to Ukraine. Peace talks took place between Zurabov, Ukrainian Ambassador to Germany, Pavlo Klimkin and Heidi Tagliavini, a special representative from the Organization for Security and Cooperation in Europe. Photographer: Sergei Supinsky/AFP/Getty Images

Russian, German and Polish officials met in St. Petersburg to advance Ukraine peace talks after President Petro Poroshenko called for an evacuation corridor so civilians can flee fighting in the country’s battle-torn east.

A day after Ukraine’s Foreign Ministry said peace talks with Russia were yielding progress, Poroshenko ordered Ukrainian regions to accept refugees from areas where government forces are combating separatists who want to join Russia. Ukrainian troops repelled attacks on airfields in the Luhansk and Donetsk regions, killing 43 rebels, according to counter-terror operation spokesman Vladyslav Seleznyov.

Clashes raged after three-way meetings between Russia, Ukraine and the Organization for Security and Cooperation in Europe in Kiev reached agreement on implementing a peace plan drawn up by Poroshenko and priorities for de-escalation in Donetsk and Luhansk, Ukraine’s Foreign Ministry said in a statement. The former Soviet republic blames Russian President Vladimir Putin for fomenting the unrest.

“We’re at the point where there is the real possibility of achieving a cease-fire,” Swiss President Didier Burkhalter, who is also the chairman of the OSCE, said in Bern today.

Light Visible

Ukraine’s U.S. and European allies have imposed sanctions on Russia and threatened to tighten them unless Putin acts to ease tensions in which hundreds have died and more have been abducted in fighting between the rebels and government troops. Russia says Ukraine must stop using armed force against its own citizens in the mostly Russian-speaking east.

Russian Foreign Minister Sergei Lavrov and his German and Polish counterparts, Frank-Walter Steinmeier and Radoslaw Sikorski, arrived at a hotel in St. Petersburg, Russia.

Speaking at the start of talks in the former Russian capital, Lavrov called for an immediate end to violence in Ukraine and said it was willing to assist in talks between the government in Kiev and its regions.

Poland’s Sikorski defended Ukraine’s actions, saying there was no threat in Ukraine’s efforts to deepen ties with the EU, which Russia opposes, and that membership in the North Atlantic Treaty Organization was “not on the agenda.” He said the government had the right to use force against illegal groups “but I hope now that the time has come for dialog.”

Small Light

Steinmeier said the priority was to establish a cease-fire in Ukraine and clamp down on border controls. He said there was a “new atmosphere” surrounding Ukraine following Poroshenko’s election victory and that most Ukrainians favored unity.

“We see a small light at the end of the tunnel,” Steinmeier said. “I hope that the influence that Russia has will be brought to bear on the separatist groups.”

In separate talks, Ukraine and Russia failed to reach an agreement on natural gas deliveries during overnight negotiations hosted by the European Union as OAO Gazprom (GAZP) insisted on receiving a debt payment before a deadline today.

Gazprom will not delay today’s deadline, under which Ukraine must make prepayments for gas supplies, spokesman Sergei Kupriyanov said by phone.

Putin will meet Gazprom Chief Executive Officer Alexey Miller and Energy Minister Alexander Novak before talks resume, two officials said, asking not to be named because the meeting is private. Talks may resume today at 9 p.m. central European time or tomorrow morning, EU Energy Commissioner Guenther Oettinger told reporters in Brussels after more than seven hours of talks that ended yesterday.

Clashes Persist

The EU, reliant on Russian gas piped through Ukraine for about 15 percent of its supplies, is trying to broker a deal to avert a cutoff.

“All parties are engaged to avoid any wrong development,” Oettinger said. “We have some open questions and some different positions, but we agreed to continue negotiations.”

Clashes have persisted between rebels and Ukrainian army units seeking to reassert Kiev’s control over the eastern regions. Billionaire Poroshenko, 48, said at his inauguration that he would draft plans to decentralize power and proposed a partial amnesty and free passage for Russian “mercenaries.”

Two government troops were wounded when they beat back attacks by insurgents trying to break out of Slovyansk, a separatist stronghold now surrounded by Ukrainian forces.

“Near the city of Slovyansk, insurgents are continuing attempts to break the siege,” Seleznyov said by phone.

Airfield Attacks

Government forces repelled a separatist strike on an airfield in the Luhansk region as well as another attack on the Kramatorsk airport in Donetsk, where they killed about 40 rebels last night, he said.

Two children were also killed in Slovyansk during the fighting, Donetsk regional administration press officer Ilya Suzdalev said by phone. Another child died on the weekend.

Russia’s financial markets ended two days of gains after rallying in recent weeks on expectations the tension is easing. The Micex stock index (INDEXCF:US) weakened 0.2 percent to 1,482.14 at 2:26 p.m. in Moscow after earlier posting a 20 percent jump since mid-March. The ruble was little changed against the central bank’s basket of dollars and euros.

Ukraine’s bonds joined the rally last month, after approval of a $17 billion International Monetary Fund loan, and have surged since Poroshenko and Putin held their first presidential meeting last week. Even still, the yield on dollar debt due in July 2017 rose 12 basis points to 8.67 percent in Kiev. It plunged 40 basis points yesterday, down from 14.7 percent five weeks ago.

In his inaugural speech, Poroshenko switched between languages to address Russian speakers in their mother tongue, pledging to “preserve and strengthen Ukrainian unity and ensure lasting peace.” He said he’d steer the nation toward closer ties with the EU, create jobs and stamp out graft.

To contact the reporters on this story: Daria Marchak in Kiev at dmarchak@bloomberg.net; Daryna Krasnolutska in Kiev at dkrasnolutsk@bloomberg.net; Volodymyr Verbyany in Kiev at vverbyany1@bloomberg.net

To contact the editors responsible for this story: Balazs Penz at bpenz@bloomberg.net Michael Winfrey, James M. Gomez


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