East Ukraine Clashes Persist as Gas Talks With Russia Progress

Jun 02, 2014 5:37 pm ET

(See EXT2 for more on the Ukraine crisis.)

June 3 (Bloomberg) -- Clashes in Ukraine’s eastern Luhansk province between separatists and the army left at least a dozen people dead, while the Ukrainian and Russian governments made progress in talks over their gas dispute.

A blast in central Luhansk killed seven people, the local health service said. Rebels initially said it was an air strike, which the government denied. Earlier yesterday, about 500 insurgents attacked the border guard headquarters in Luhansk, and the guard service said five of its personnel were killed as they fought back.

The conflict pits separatists with ties to Russia against the army of the government in Kiev, backed by the U.S. and European Union. It escalated after protesters toppled Ukraine’s pro-Russian government in February, and Russian President Vladimir Putin responded a month later by annexing Crimea from Ukraine.

The U.S. and EU say Russia is behind the unrest in Luhansk and nearby regions. U.S. President Barack Obama is traveling to Europe this week and will meet leaders, including Ukraine’s newly elected President Petro Poroshenko, to discuss the crisis. Obama also will cross paths with Putin during World War II anniversary ceremonies in France.

Talks between Russia and Ukraine are currently confined to their dispute over gas payments. In a conciliatory move yesterday, Russia gave Ukraine an extra week to pay in advance for supplies, before risking a cutoff that could also lead to shortages in Europe.

‘Constructive’ Talks

Russian Energy Minister Alexander Novak said the talks in Brussels, brokered by the EU, were “constructive.” Ukraine last week transferred $786 million to cover gas it received in February and March, its first payment in months.

“Moscow possibly did not want the prospect of gas cuts this week to dominate the agenda and sour the mood” before Putin’s visit to France for the anniversary of the D-Day landings, Tim Ash, head of emerging-markets research at Standard Bank Plc in London, said in an e-mail.

Ukraine carries about 15 percent of the natural gas used by Europe through its Soviet-era pipelines and accuses Russia of using energy as a political weapon by ramping up prices.

Russia’s Micex stock index rose 2.3 percent, extending its gain in the past month to more than 12 percent.

Obama’s trip offers a series of venues for possible talks on the Ukraine conflict. He’ll meet other G7 leaders and also attend a dinner with Francois Hollande the same night that the French president hosts Putin. Vice President Joe Biden will travel to Ukraine on June 7, the White House said yesterday.

Russia plans to submit a United Nations Security Council resolution seeking a cease-fire and peace talks in eastern Ukraine, and allowing humanitarian aid to the region, Foreign Minister Sergei Lavrov said in Moscow.

--With assistance from Michael Winfrey in Prague, Ewa Krukowska and James G. Neuger in Brussels, Henry Meyer in Moscow and Volodymyr Verbyany in Kiev.