Bloomberg News

Ukraine Sees Russia Hand in Downed Plane as Talks Begin

July 14, 2014

Ukraine Fights Rebels in Luhansk as Russia Denounces Shellfire

A pro-Russian militant gestures as he guards a checkpoint on the road between Luhansk and Donetsk, eastern Ukraine. Photographer: Dominique Faget/AFP via Getty Images

Ukraine’s government said Russian forces may have shot down one of its airplanes to bolster the Kremlin-backed insurgency amid a European push for peace talks that Germany expects to inch forward today.

An An-26 transport plane was shot down in eastern Ukraine yesterday by a “powerful weapon” not previously used by the separatists, probably from inside Russia, Defense Minister Valeriy Geletey told President Petro Poroshenko, according to the president’s website. The plane was hit at 6,500 meters, an altitude shoulder-fired missiles can’t reach, he said.

Fighting between Ukrainian forces and pro-Russian separatists, which has claimed hundreds of lives, intensified after Poroshenko called off a cease-fire on July 1. The government is trying to tighten its encirclement of insurgents who retreated to the mainly Russian-speaking eastern cities of Luhansk and Donetsk last week, as well as stop the flow of weapons and fighters across its 2,000 kilometer (1,200 mile) border with Russia.

Officials from Ukraine, Russia and the Organization for Security and Cooperation in Europe agreed to hold a video conference today with rebel representatives that should pave the way for face-to-face talks to find a way to end the conflict, Germany’s government said yesterday.

Missile Strike

The plane shot down was probably struck either by an air-to-air missile from a jet based at Russia’s Millerovo base or a surface-to-air rocket from a mobile ground system, Andriy Lysenko, a Defense Ministry spokesman, said in Kiev. The seven crew and one passenger on board survived. Igor Konashenkov, a spokesman for Russia’s Defense Ministry, couldn’t be reached for comment on his mobile phone.

“The rebels may have gotten their hands on something like the Osa,” Pavel Felgenhauer, an independent Moscow-based defense analyst, said by phone, referring to a Russian mobile surface-to-air system. “However, there’s no reason to assume the shot was fired from Russia.”

As Ukraine’s U.S. and European allies warn President Vladimir Putin to help stop the conflict or face more sanctions, Russia’s moving forces back to the border, according to Ukrainian and NATO officials. Russia moved about 40,000 troops to the frontier after the ouster of Kremlin-backed President Viktor Yanukovych in February before pulling almost all of them back under international pressure, according to NATO. Now about 10,000 to 12,000 troops have returned to the region, Reuters cited an unidentified NATO officer as saying.

‘Escalation’ Course

“The developments of recent days show the Russian side has taken a course of escalation,” Lysenko said.

Lysenko dismissed Russian claims that its military was behind artillery fire that killed at least one person in the Russian region of Rostov last week. Ukraine also has proof that its border guards were attacked from Russian territory and that Russian helicopters and drones crossed over the border, he said.

“Pro-Russian militants used mortar fire and killed one Russian citizen,” Lysenko said. “Now Russia is trying to present the shooting as an attack from the Ukrainian army. Those accusations are groundless.”

Russian officials said Ukrainian forces fired at least seven shells into Russia two days ago, prompting some media in Moscow to report that Russia was planning military strikes in retaliation. Putin’s spokesman, Dmitry Peskov, called those assertions “nonsense.”

At the same time, the Rostov incident is an “escalation of the danger to our citizens on our own territory,” Russian Deputy Foreign Minister Grigory Karasin told state television. “Clearly, this won’t go unanswered.”

No Progress

U.S. President Barack Obama and U.K. Prime Minister David Cameron said Russia needs to act immediately to de-escalate the situation, according to a White House transcript of a phone call between the two men over the weekend.

Russia needs to enforce a cease-fire and halt the flow of weapons and fighters across Ukraine’s border, among other measures, Obama and Cameron said.

“So far, neither the United States nor the United Kingdom have seen progress on complying with these conditions,” the White House said in the statement. The countries should “take further coordinated measures to impose costs on Russia if it does not take immediate steps toward de-escalation.”

Last Stand

Government troops conducted five air strikes against rebel bases and transport, including on positions blockading Ukrainian troops at the air field in Luhansk, a city of about 450,000 people, Lysenko said. The army also traded fire with insurgents inside Luhansk’s city limits, with shells hitting a school and houses, newswire 0642.com.ua reported.

“The enemy had great losses in manpower and equipment,” Ukraine’s Defense Ministry said in a statement.

The EU should give a “proper assessment” of illegal border crossings by military vehicles, and Ukraine should be put on the agenda of a July 16 meeting of the Council of Europe, Poroshenko said on his website yesterday after speaking with EU President Herman Van Rompuy by phone. He demanded that all prisoners being held in Russia be released.

The yield on Ukraine’s April 2023 dollar bonds rose six basis points, or 0.06 percentage point, to 8.37 percent. Last week, the bonds closed at their highest since June 2013 after Standard & Poor’s raised the outlook on the country’s credit rating to stable from negative, citing a $17 billion loan from the International Monetary Fund. It kept Ukraine’s CCC ranking, eight levels below investment grade.

Russia’s Micex Index fell 1.1 percent to 1,483.41, while the ruble wealened 0.4 percent against the central bank’s target euro-dollar basket.

Sanctions Threat

The EU last week named 11 more people to its list of sanctions for supporting the insurrection, including leaders of the self-declared Donetsk and Luhansk republics. The 28-nation bloc has blacklisted 72 people and two companies connected with the destabilization of Ukraine and Russia’s annexation of Crimea in March.

The EU’s first opportunity to consider wider penalties on Russian industry, investment or trade will be at the July 16 summit. Objections by countries such as Italy, Austria, Slovakia, France and Greece have frustrated moves toward broader sanctions, which require unanimity.

The crisis has forced tens of thousands of Ukrainians from their home, according to the United Nations. Russia has received 30,495 requests for refugee status or temporary asylum from Ukrainians, Interfax reported, citing Russian Federal Migration Service chief Konstantin Romodanovsky.

Ukraine expects the Russian authorities to undertake an “objective” assessment of the causes of fatal shelling in Rostov, the Foreign Ministry said in a statement.

To contact the reporters on this story: Daria Marchak in Kiev at dmarchak@bloomberg.net; Daryna Krasnolutska in Kiev at dkrasnolutsk@bloomberg.net; Jake Rudnitsky in Moscow at jrudnitsky@bloomberg.net

To contact the editors responsible for this story: Balazs Penz at bpenz@bloomberg.net; James M. Gomez at jagomez@bloomberg.net Brad Cook


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