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Ukrainian soldiers stand guard at the gate of a military base in the port of Kerch, Ukraine, Monday, March 3, 2014. Pro-Russian troops controlled a ferry terminal on the easternmost tip of Ukraine's Crimea region close to Russia on Monday, intensifying fears that Moscow will send even more troops into the strategic Black Sea region in its tense dispute with its Slavic neighbor. (AP Photo/Darko Vojinovic)
Russia sets Ukraine agenda with diplomacy, threats
First Published Mar 03 2014 06:06 pm • Last Updated Mar 03 2014 09:14 pm

Kiev, Ukraine • Russian troops said to be 16,000 strong tightened their stranglehold on Ukraine’s Crimean Peninsula Monday, openly defying the U.S. and the European Union and rattling world capitals and stock markets.

The West struggled to find a way to get Russia to back down, but with little beyond already threatened diplomatic and economic sanctions, global markets fell sharply over the prospect of violent upheaval in the heart of Europe.

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For its part, Moscow reiterated its price for ending the crisis: restoration of a deal reached with the opposition less than two weeks ago to form a national unity government in Kiev that represents pro-Russian as well as Ukrainian interests, with new elections to be held by December.

Ukraine, meanwhile, accused Russia of piracy for blocking two of the besieged country’s warships and ordering them to surrender or be seized.

The U.S. originally estimated that 6,000 Russian troops were dispatched to Crimea, but Ukraine’s mission to the United Nations said Monday that 16,000 had been deployed. That stoked fears that the Kremlin might carry out more land grabs in pro-Russian eastern Ukraine.

U.S. Secretary of State John Kerry was headed to Kiev in an expression of support for Ukraine’s sovereignty, and the EU threatened a raft of punitive measures as it called an emergency summit for Thursday. The Pentagon said it was suspending exercises and other activities with the Russian military.

But it was Russia that appeared to be driving the agenda.

Foreign Minister Sergey Lavrov said at a U.N. Human Rights Council session in Geneva that Ukraine should return to an agreement signed last month by pro-Russian President Viktor Yanukovych — but not Moscow — to hold early elections and surrender some powers. Yanukovych fled the country after sealing the pact with the opposition and foreign ministers of France, Germany and Poland.

"Instead of a promised national unity government," Lavrov said of the fledgling new administration in Kiev, "a government of the victors has been created."

The latest flashpoint came when Ukrainian authorities said Russian troops had issued an ultimatum for two of the besieged country’s warships to surrender or be seized.


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"I call on the leadership of the Russian Federation. Stop the aggression, stop the provocations, stop the piracy! These are crimes, and you will be called to account for them," said acting Ukrainian President Oleksandr Turchynov.

"The commanders and crews are ready to defend their ships. They are defending Ukraine," Turchynov said in a televised address to the nation after a military spokesman said Ukraine’s corvette Ternopil and command ship Slavutych were being blocked by four Russian navy ships in the Crimean port of Sevastopol.

Vladimir Anikin, a Russian defense ministry spokesman, dismissed the accusation as nonsense but refused to elaborate.

In Washington, the State Department warned of a "dangerous escalation" and said the U.S. would hold Moscow directly accountable for any threat to Ukraine’s navy.

Russia is "on the wrong side of history" in Ukraine, President Barack Obama said, adding that continued military action would be "a costly proposition for Russia." Speaking to reporters in the Oval Office, Obama said the U.S. was considering economic and diplomatic options that will isolate Russia, and called on Congress to work on an aid package for Ukraine.

Still, it was not clear what the West could do to make Russia retreat. The clearest weapon at the disposal of the U.S. and the EU appeared to be economic sanctions that would freeze Russian assets and pull the plug on multibillion dollar deals with Russia. Late Monday, the EU threatened to freeze visa liberalization and economic cooperation talks and boycott the G-8 summit in Russia later this year.

Already the economic fallout for Russia was being intensely felt. Russia’s stock market dropped about 10 percent Monday and its currency fell to its lowest point ever against the dollar. But the economic consequences of antagonizing Russia were also acute for Western Europe. The EU relies heavily on Russian natural gas flowing through a network of Ukrainian and other pipelines.

Global market reaction to the Russian seizure was furious. On Wall Street, both the Dow Jones industrial average and the Nasdaq composite closed sharply down, while oil prices rose on fears that Russia, a major oil exporter, might face sanctions. In European trading, gold rose while the euro and stock markets fell.

The greatest impact, however, was felt in Moscow, where the main RTS index was down 12 percent at 1,115 and the dollar spiked to an all-time high of 37 rubles. Russia’s central bank hiked its main interest rate 1.5 percentage points to 7 percent, trying to stem financial outflows.

Gazprom, the Russian energy giant, was also a big loser, its share price down 13 percent as investors worried how it would get its gas to Europe if hostilities kept up, since much of it goes through Ukrainian pipelines.

Moscow has justified its military moves in Crimea as necessary to protect its country’s citizens living there. At an emergency session of the Security Council on Monday, Russia’s U.N. ambassador, Vitaly Churkin, told council members Russian troops were deployed at the request of Yanukovych.

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