Armed Men Seize Police Station in Slavyansk; Ukraine Prepares Armed Response; Ukraine Suspends Gas Payments to Russia

The crisis in Ukraine took a turn for the worse this weekend. Many distinct events are in play. Here are a few top headlines

Armed Men Seize Police Station in Slavyansk

The Wall Street Journal reports Pro-Russia Protests Spread, Police Station Seized.

Pro-Russia protests spread Saturday in eastern Ukraine as armed men, some in unmarked, military-style uniforms, moved to commandeer more government buildings—a dramatic escalation that the Ukrainian government and Washington tied to Moscow.

Ukraine's acting president called an emergency meeting of the country's top security officials in the capital, Kiev, as police clashed with attackers in several spots in the largely Russian-speaking, eastern part of the country.

Some 20 men wearing camouflage, some with military-style equipment and weapons, commandeered a police station and security-service office early Saturday in Slavyansk, a small city that previously hadn't seen the kind of pro-Russian fervor that erupted anew in the area last weekend.

Ukraine's Interior Minister Arsen Avakov said Saturday evening that police were fighting with attackers in the nearby town of Kramatorsk and had repelled a similar attack in a third town, Krasny Liman.

Saturday afternoon, police in Poltava Region said they had stopped several buses carrying what they said were pro-Russian activists carrying gasoline bombs and makeshift weapons. They were headed to Kharkiv, where protests were scheduled. Police detained about 70 of the activists.

Protesters remain barricaded Saturday in the regional government headquarters in Donetsk and the security-service offices in Luhansk, which they had occupied last Sunday. Authorities pushed a group out of a government building in Kharkiv earlier in the week.

Western officials say Moscow has tens of thousands of troops on its side of the border that could invade Ukraine in a matter of hours. Moscow denies that.

Ukraine Prepares Armed Response

Reuters reports Ukraine Prepares Armed Response as City Seized by Pro-Russia Forces.

Armed separatists took virtual control of a city in eastern Ukraine on Saturday and Kiev prepared troops to deal with what it called an "act of aggression by Russia".

Pro-Russian activists carrying automatic weapons seized government buildings in Slaviansk and set up barricades on the outskirts of the city. Official buildings in several neighboring towns were also attacked.

The developments have increased concerns of a possible "gas war" that could disrupt energy supplies across the continent.

Washington backed Kiev's assessment that Moscow was responsible. "Worrisome violence in ... Ukraine today. Russia again seems to be behind it," State Department spokeswoman Jen Psaki said on Twitter.

ROADBLOCKS AROUND CITY

On a road leading into Slaviansk, other members of the group, armed with automatic rifles, set up a roadblock and checked vehicles entering the city, a Reuters reporter said.

There was no sign of any Ukrainian law enforcement officials in the city.

Ukraine's Western-backed government warned of tough action if the militants did not lay down their weapons, but it was unclear if the local law enforcement agencies were taking orders from Kiev any more after the local police chief quit.

Kostyantyn Pozhydayev came out to speak to pro-Russian protesters at his offices in the regional capital, Donetsk, and told them he was stepping down "in accordance with your demands". Some of his officers left the building.

The occupations are a potential flashpoint because if protesters are killed or hurt by Ukrainian forces, that could prompt the Kremlin to intervene to protect the local Russian-speaking population, a repeat of the scenario in Crimea.

Ukraine's acting foreign minister, Andriy Deshchytsia, said he had spoken by telephone with Russian Foreign Minister Sergei Lavrov and demanded Moscow stop what he called "provocative actions" by its agents in eastern Ukraine.

Lavrov, in a statement issued by his ministry, said there were no Russian agents in the region and that it would be "unacceptable" if Ukrainian authorities were to order the storming of the buildings.

Ukraine Suspends Gas Payments to Russia

Reuters reports Ukraine Suspends Gas payments to Russia

Ukraine's state-run energy company Naftogaz has suspended gas payments to Russia until the conclusion of price talks, chief executive Andriy Kobolev was quoted as saying on Saturday.

Russian gas giant Gazprom earlier this month increased gas price for Ukrainian consumers to $485 per 1,000 cubic meters (tcm) from $268 for the first quarter, saying Kiev was no longer eligible for previous discounts.

"The question of repayment of debt is directly linked to the maintenance of gas prices at the level of the first quarter," Kobolev told the Zerkalo Nedely weekly in an interview, referring to the original price of $268 per tcm.

"We see no reason to revise the price. We consider the price at around $500 as non-market, unjustified and unacceptable. Accordingly, we have suspended payments for the period of the price negotiations."

Russian President Vladimir Putin warned on Thursday that Moscow could cut off gas to Ukraine, potentially threatening European supplies, but later played down the threat.

"I want to say again: We do not intend and do not plan to shut off the gas," he said on Friday.

Gas Wars

Given that Ukraine has suspended payments, I find Putin's statements puzzling. If Putin will not shut off the gas, then Ukraine has no incentive to pay.

Expect Putin to quickly change his mind about shutting the pipeline if Ukraine does indeed refuse to pay. He will have a legitimate reason.

As for market prices, Russia can charge what it wants in my opinion. Countries can either pay or not pay.

This is the consequence of being dependent on a single supplier.

Mike "Mish" Shedlock
http://globaleconomicanalysis.blogspot.com