Obama poised for new sanctions on Russia if no progress on Ukraine
TOKYO/DONETSK Ukraine (Reuters) - U.S. President Barack Obama said on Thursday he was poised to impose new sanctions on Moscow if it does not act fast to end an armed stand-off in Ukraine, but there was a first, tentative sign that pro-Russian separatists were ceding ground.
Moscow also flexed its economic muscles in its worst stand-off with the West since the Cold War, with the government suggesting foreign firms which pull out of the country may not be able to get back in, and a source at Gazprom saying the gas exporter had slapped an additional $11.4 billion bill on Kiev.
Under an international accord signed in Geneva last week, illegal armed groups in Ukraine, including the pro-Russian rebels occupying about a dozen public buildings in the east of the country, are supposed to disarm and go home.
Washington accuses Moscow of fomenting unrest in eastern Ukraine while Russia denies this and counters that Europe and the United States are supporting an illegitimate government in Kiev.
"So far at least we have seen them not abide by the spirit or the letter of the agreement in Geneva," Obama said of the Russian leadership on a visit to Japan.
"We have prepared for the possibility of applying additional sanctions," he told a news conference. "There’s always the possibility that Russia, tomorrow, or the next day, reverses its course and takes a different approach."
So far, the United States and European Union have imposed visa bans and asset freezes on a few Russians in protest at Moscow's annexation last month of Crimea from Ukraine.
However, Russian news agencies quoted Foreign Minister Sergei Lavrov as saying that he expected "the Geneva accords will be implemented in practical actions in the near future".
In NATO member Poland, the first group of a contingent of around 600 U.S. soldiers arrived on Wednesday. They are part of an effort by Washington to reassure eastern European allies who are worried by a build-up of Russian forces near Ukraine's borders.
In Ukraine, there were the first substantial signs that the Geneva accord is being implemented.
Kiev troops with five light armoured vehicles took control of a checkpoint north of the city of Slaviansk on Thursday after separatists appeared to abandon the position, Reuters journalists said from the scene.
Earlier, the Western-backed government said the city hall in Mariupol, which had been seized by separatists, was now back under central control. Interior Minister Arsen Avakov said the mayor was back in his office.
"In this instance there were no casualties ... The process of getting the situation back to normal in the city will continue," he said in a post on his Facebook page.
Kiev also reported a shootout overnight in another part of the east when a Ukrainian soldier was wounded, while pro-Russian separatists who control Slaviansk were holding three journalists, including U.S. citizen Simon Ostrovsky.
Ukraine, a former Soviet republic, slid into unrest late last year when Moscow-backed President Viktor Yanukovich rejected a pact to build closer ties with Europe. Protesters took over central Kiev, forcing him to flee in February.
Days later, Russian troops seized control of Crimea. Moscow then annexed the region, saying it was protecting Russian residents, while the West called the action an illegal land grab.
The focus has now shifted to eastern Ukraine, the industrial heartland and home to a large Russian-speaking community.
NO WAY BACK?
With rhetoric building from the United States about the imposition of a new, tougher round of sanctions, Russia suggested on Thursday that Western firms which pulled out of the country may not be able to get back in.
"It is obvious that they won't return in the near future if they sever investment agreements with us, I mean there are consequences as well," Natural Resources Minister Sergei Donskoy told reporters.
"Russia is one of the most promising countries in terms of hydrocarbons production. If some contracts are severed here, then, colleagues, you lose a serious lump of your future pie," the minister added.
However, Western oil majors BP and Royal Dutch Shell were sticking with their projects in Russia, he noted.
Supplies of Russian gas to Europe are also, potentially, at risk from the crisis over Ukraine. Moscow has threatened to cut Kiev off unless it pays off its debts, and drastically raised this bill this week.
State-controlled Gazprom sent Ukrainian energy firm Naftogaz an additional bill on Wednesday of $11.4 billion, more than five times its previous claim, a source at the company said. This was in addition to the $2.2 billion that Naftogaz already owes for supplies in 2013 and 2014 so far.
Moscow nearly doubled the gas price for Ukraine from April but Kiev, which is in financial trouble, is refusing to pay.
If Moscow cuts off the flow to Kiev, this would have a knock-on effect on European customers further West, because many of the pipelines that deliver their gas run through Ukraine.
European and Ukrainian officials were to meet in Slovakia, which borders Ukraine, on Thursday to try to work out ways to mitigate the impact if Ukraine is cut off.
The options include reversing the usual east-west flow of the pipelines to Europe to pump gas back into Ukraine, but the volumes that could be supplied this way would be only a small fraction of the amount that Ukraine needs.
Unarmed mediators from the Organisation for Security and Cooperation in Europe are in eastern Ukraine trying to persuade pro-Russian gunmen to go home, in line with the Geneva accord.
Though there was the possibility of progress, there were also fresh indications of the violence that has flared several times since the accord was signed, and threatened to torpedo it.
Interior minister Avakov said troops loyal to Kiev had repelled an overnight attack on their base in eastern Ukraine. In his Facebook post, he said the raid was led by a thickly-bearded man he alleged was a Russian soldier who had been spotted previously helping the separatists.
The Russian Foreign Ministry ridiculed this assertion, suggesting that it came from Washington. "We would like to hope that the United States will stop these invented accusations against Russia," it said in a statement.
Reuters reporters have not been able to establish that any Russian troops or special forces members are in the region, though Kiev and Western powers say they have growing evidence that Moscow has a covert presence.
Russian President Vladimir Putin has described as "nonsense" allegations that Moscow has its forces in eastern Ukraine. It says the unrest is a spontaneous protest by local people who fear persecution from the government in Kiev which is illegitimate and has far-right links.
(Additional reporting by Aleksandar Vasovic in Slaviansk, Alexander Reshetnikov and Gleb Garanich near Slaviansk, Pavel Polityuk, Natalia Zinets, Richard Balmforth and Alastair Macdonald in Kiev, Denis Dyomkin in Birobidzhan, Russia, and Alessandra Prentice and Vladimir Soldatkin in Moscow; writing by Christian Lowe; editing by David Stamp)
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