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Thursday, April 17, 2014 1:22 PM

Ukraine Talks End in Accord; What About the Key Missing Player?

Bloomberg reports Treasuries Fall Most in a Month as Ukraine Talks End in Accord

Treasuries fell, pushing 10-year note yields up the most in a month, as talks on the crisis in Ukraine ended with an accord aimed at de-escalating the conflict, damping haven demand.

Talks in Geneva between Russian Foreign Minister Sergei Lavrov, his Ukrainian counterpart, Andriy Deshchytsia, U.S. Secretary of State John Kerry and Catherine Ashton, the European Union’s foreign-policy chief, went on for more than six hours, longer than scheduled.

"The Geneva meeting on the situation in Ukraine agreed on initial concrete steps to de-escalate tensions and restore security for all citizens,” the four said in a joint statement. “All sides must refrain from any violence, intimidation or provocative actions.”
Text of the Joint Statement

Here is the complete Text of Joint Statement on Ukraine
The Geneva meeting on the situation in Ukraine agreed on initial concrete steps to de-escalate tensions and restore security for all citizens.

All sides must refrain from any violence, intimidation or provocative actions. The participants strongly condemned and rejected all expressions of extremism, racism and religious intolerance, including anti-semitism.

All illegal armed groups must be disarmed; all illegally seized buildings must be returned to legitimate owners; all illegally occupied streets, squares and other public places in Ukrainian cities and towns must be vacated.

Amnesty will be granted to protesters and to those who have left buildings and other public places and surrendered weapons, with the exception of those found guilty of capital crimes.

It was agreed that the OSCE Special Monitoring Mission should play a leading role in assisting Ukrainian authorities and local communities in the immediate implementation of these de-escalation measures wherever they are needed most, beginning in the coming days. The U.S., E.U. and Russia commit to support this mission, including by providing monitors.

The announced constitutional process will be inclusive, transparent and accountable. It will include the immediate establishment of a broad national dialogue, with outreach to all of Ukraine's regions and political constituencies, and allow for the consideration of public comments and proposed amendments.

The participants underlined the importance of economic and financial stability in Ukraine and would be ready to discuss additional support as the above steps are implemented.
Defusing the Conflict

The Guardian reports Geneva talks produce agreement on defusing conflict.
The US, Russia, Ukraine and the European Union have agreed a plan aimed at defusing the gathering conflict in eastern Ukraine.

At a meeting in Geneva which began with low expectations but led to seven hours of intense negotiations, foreign ministers agreed a series of "concrete steps" to be taken by all sides. The agreement puts on hold for now at least additional economic sanctions against Russia.

The US secretary of state, John Kerry said the agreement "represents a good day's work" but would have little meaning if it was not followed by action on all sides to calm the situation. He said if the US and EU did not see progress, new sanctions would follow.

The success of the agreement will depend on its implementation. Kerry made it clear that the US would hold Moscow responsible for controlling the pro-Russian protesters, who Putin has portrayed as independent minded Ukrainians.
Lots of Questions

This accord raises more questions than answers.

  • Did anyone consult the separatists?
  • Who is going to enforce the agreement?
  • Is there a single voice, or even a small group of voices who can speak for the separatists?

If the separatists are acting on their own, then unless Russia or someone else can convince the separatists to lay down their arms, the accord may break down.

Separatists are the key players in this crisis, but it does not appear they were even invited to the table.

In the meantime, let's see if it holds. It might. And if it does hold, then Russia probably got what it wanted out of the agreement.

Mike "Mish" Shedlock

11:01 AM

Putin Threatens Military Intervention in Ukraine; Obama's Hypocritical Response

In his strongest message yet to Ukraine, the EU, and US, Putin says Russia ready to act in Ukraine

Russian President Vladimir Putin has warned of his readiness to deploy troops in eastern Ukraine if diplomatic efforts fail to resolve the escalating crisis there.

The threat came as foreign ministers from Russia, Ukraine, the US and EU were meeting in Geneva to find ways to ease the tension.

Speaking in a live television phone-in hours after the first deadly clash between pro-Russia protesters in the eastern region and Kiev’s security forces, Mr Putin said he hoped for a political resolution to the crisis but warned that the campaign for Ukraine’s May 25 presidential election was “being run in an absolutely unacceptable way”.

“The Federation Council granted the president the right to use military force in Ukraine,” he said in response to one of 2m questions submitted to him. “I really hope that I do not have to exercise this right and that we are able to solve all of today’s pressing issues with political and diplomatic means.”

But he added: “If everything continues like this, then of course we cannot recognise as legitimate what is happening and what will happen after May 25.”

Mr Putin called on Kiev to withdraw its forces from southeastern Ukraine and engage in dialogue on the country’s future with pro-Russia protesters in the region.

Mr Putin signalled that he might be ready for a pragmatic solution. Despite repeating Moscow’s scathing rejection of Ukraine’s interim government as illegitimate, he said: “We need to come to agreement with those who view themselves as the authorities in Ukraine. But they need to behave reasonably.”

US President Barack Obama said in an interview on Wednesday that Mr Putin was supporting “at minimum, non-state militias” in Ukraine.
Obama's Hypocrisy 

Two wrongs don't make a right but it's certainly fair to point out the "US is supporting, at minimum, non-state militias in Syria". How many other places?

We only like intervention when we do it.

Assuming one believes that Russia is indeed directly supporting militias in Ukraine (something that is arguably debatable), at least Russia has a vested interest given that it borders Ukraine.

Russia fears US missiles and military buildups in Eastern Europe, as well it should. After all, the US did renege on promises not to expand NATO into Eastern Europe.

Mike "Mish" Shedlock

1:13 AM

Talk of Bloodless Coup in Donetsk; European Countries Resent US Tone; Low Hopes for Peace Talks; War, What Is It Good For?

Another bloodless coup in Ukraine is underway. This time, it's in the Donetsk region.

Should it come to that ending, it would be the third Ukrainian coup in a matter of months (counting the ouster of former president Viktor Yanukovych followed by the coup in Crimea).

Talk of Bloodless, Passive Coup in Donetsk

Please consider Kiev’s Weak Grip on East Falters.

Moscow is only an hour ahead of Donetsk but the inflammatory descriptions emanating from Russia over events in eastern Ukraine on Wednesday were much further distanced from reality.

As President Vladimir Putin was talking of his neighbouring country as being “on the brink of a civil war”, in Slavyansk the conflict was far more psychological than physical. Apart from the occasional fly-past by a single fighter jet and two helicopters, Kiev’s forces kept a low profile throughout the day in the area northeast of Donetsk, where militias and locals have seized or set up vigils at government buildings in several towns and cities.

Rather than civil war, the scene resembled a sort of bloodless, passive coup. “I am a citizen of the Soviet Union,” said one of the mysterious and heavily armed “green men” wearing military camouflage without insignia.

The man refused to give his name but admitted that, like others around him, he had travelled up from Semfiropol in Crimea – the autonomous republic annexed by Russia in March and now already switched to Moscow’s time zone. Many of his comrades sported the black and orange striped ribbon adopted by pro-Russian forces.

All along the main route from Donetsk, and in several adjacent town centres, local people have created and manned an increasing number of makeshift barricades of tyres, often topped by the flags of Russia and the “Donetsk Republic”.

But despite the government’s angry denunciations of the seizures of police offices, administrative buildings and other property, there have been few attempts by local authorities to prevent them and Kiev’s hold on the east appears to be weaker than ever. Despite orders several weeks ago to stop broadcasting Russian television, local people said the channels had been back on air in the Donetsk region since earlier this week.

Easterners who reject calls for a referendum on creating an autonomous republic in Donetsk, a federation or union with Russia – views which opinion polls until recently suggested remained in the a minority – are for the time being keeping their heads down.
Polls Show Majority in Donetsk Prefer Alliance with Russia

In spite of all the talk, the government in Kiev seems unable or unwilling to take Donetsk by force. Why should it?

Polls suggest a majority in Donetsk would vote for a federation or union with Russia. You cannot win over hearts and minds with force.

European Countries Resent US Hectoring Tone

The Financial Times reports EU Sanctions Push on Russia Falters Amid Big Business Lobbying.
Europe’s resolve to impose tough sanctions on Moscow is cracking under corporate lobbying, as companies warn governments that any retaliation from the Kremlin could cost them dearly.

Diplomats fear that talks in Geneva on Thursday between the US, Russia, Ukraine and the EU will prove fruitless in tackling the crisis over the occupation of local government buildings in eastern Ukraine by pro-Russian militants. If the talks fail, EU leaders are expected to meet next week to discuss broad economic sanctions against Moscow.

But even before such a meeting, the fissures between countries are evident. “Are the member states united on this? No. Are they willing to die for Ukraine? I don’t think so,” a senior European official said, noting that sanctions would demand a consensus from the 28-member bloc.  

European countries have resented the US’s hectoring tone on the need for sterner measures against Russia, when the EU’s trade relationship is almost a dozen times bigger than America’s.

On one side of the European debate, the Baltic nations and Poland favour strong action against Moscow, while accepting that Russian retaliation could be painful. On the other, Italy and Germany are more reticent about sanctions, partly because of lobbying from their leading companies.
Sanction Scorecard

  • Germany: BASF lobbying against sanctions
  • Italy: Energy company Eni lobbying against sanctions
  • UK: BP lobbying against sanctions. BP has a 20 per cent stake in Rosneft, the state-controlled oil company.
  • Cyprus and UK: Both concerned abut financial sector risks
  • US Business Groups: lobbying against sanctions
  • Obama: Wants sterner sanctions
  • Poland, Baltic Nations: Want sterner sanctions

Low Hopes for Peace Talks

Given the reaction from Ukraine and the huge disunity regarding sanctions, it should not be any surprise that Expectations Low as Ministers Hold Ukraine Peace Talks.
As the tense stand-off in eastern Ukraine continues, the main protagonists will meet on Thursday to try to find a diplomatic solution.

Despite fears the new round of unrest might scupper the quest, the foreign ministers of Russia and Ukraine will hold their long-awaited encounter in Geneva, along with their US and EU counterparts.

Expectations for the meeting remain low, given the different agendas of the two sides, with the US seeing a chance to boost the legitimacy of the government in Kiev, while Russia is calling for radical constitutional reform in Ukraine.

Russia is sticking to its demands of “federalisation” and military neutrality for Ukraine – first laid out in a proposal a month ago.

The paper demands that Ukraine undergoes a foreign-mediated process of constitutional reform that must happen before the next presidential election. This must result in a federal structure and military neutrality for the country, give Russian the status as second official language and recognise Crimea’s departure from Ukraine.
Best Deal Ukraine Can Get

The best chance for Ukraine to hold on to Donetsk may very well be acceptance of the Russian proposal.

While pondering the above thought, here is a song that expresses my point of view rather well.

War, What Is It Good For?

Absolutely nothing!

This is not our fight, so let's not make it one.

Mike "Mish" Shedlock

Copyright 2009 Mike Shedlock. All Rights Reserved.
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