(Updates confirmation of cease-fire offer in fourth-fifth paragraphs. For more on Ukraine and Russia, see EXT2.)
Aug. 9 (Bloomberg) -- Ukrainian authorities said they succeeded in halting a Russian military convoy heading toward its border as its army squeezed the pro-Russian stronghold of Donetsk and rebels said they are open to a cease-fire.
The column of Russian soldiers and army equipment, under the guise of a humanitarian mission, stopped before crossing the border into Ukraine’s embattled east after leaders asked the U.S., Russia and the Red Cross to intervene, said Valeriy Chaly, the deputy chief of President Petro Poroshenko’s administration. A Kremlin spokesman denied Chaly’s claims.
“A very serious provocation has being prepared by the Russian Federation, which was to lead to unpredictable effect and an escalation” in hostilities, said Chaly in a statement last night. “Through diplomatic work, first of all by the president, the provocation was stopped.”
Russian President Vladimir Putin has warned that fighting between Ukrainian troops and pro-Russian separatists is creating a humanitarian disaster and has offered to provide aid. Meanwhile, Ukrainian troops continue to encircle pro-Russian separatists in their strongholds of Donetsk and Luhansk, prompting the pro-Russian rebels to offer a cease-fire on humanitarian grounds, according to the insurgents’ official Donetsk Peoples’ Republic website yesterday.
Rebel troops will continue fighting if the Ukrainian military doesn’t cease its offensive, the website said.
The situation in the city of Luhansk “remains crucial” and has been completely devoid of power, water or phone service for seven days, according to the city council’s website.
The Red Cross said it hasn’t given approval to Russia to enter Ukrainian territory as a humanitarian aid force, according to Chaly. Poroshenko spoke with U.S. Secretary of State John Kerry and Peter Maurer, the head of the International Committee of the Red Cross, last night to head off the Russian convoy, Chaly said.
“That’s not right,” said Putin spokesman Dmitry Peskov. “There were no attempts made to penetrate” Ukrainian territory “by Russian forces. That’s why we find it difficult to understand what was meant by the Ukrainian side.”
He echoed Putin’s earlier comments about concern for the health and safety of citizens in the east.
“The situation in terms of the growing humanitarian catastrophe is of deepest concern,” he said in Sochi, Russia. “This concern is the No. 1 topic for discussion. Efforts are being made in general, on bilateral and multilateral levels, to alleviate the effects of this humanitarian catastrophe.”
Chaly went on to say in his statement on Poroshenko’s website that Russian Foreign Minister Sergei Lavrov assured his Ukrainian counterpart that the convoy “would be stopped.”
Meanwhile, Kiev Mayor Vitali Klitschko ordered yellow bulldozers and dump trucks to the center of the capital to tear down and move away the remnants of the Maidan campsite, the center of protests that began in December against ousted President Viktor Yanukovych.
A few hundred volunteers and city workers were ordered in to clear up the thousands of tires, pallets and tents that remain strewed along Independence Square, or Maidan, to allow vehicle traffic through the area for the first time this year.
Sporadic fistfights broke out among clean-up crews, volunteers and demonstrators, who refused to leave and shouted “shame on you.”
The operation drew mixed emotions from Kievans, who watched from the sidelines. Though about three-quarters of the remaining Maidan squatters were homeless people who took advantage of free downtown space, the area still holds powerful community memories of the winter months when tens of thousands of Ukrainians crowded into Maidan and forced the government to flee.
“We must find a compromise to save all those artifacts we have here, to remember all the tears and blood that was spilled in Maidan,” said 52-year-old Olha Klymko, a teacher of international economics. “People were killed here.”
Klitschko, one of the most popular leaders of the December anti-Yanukovych forces, said that 90 percent of the city’s residents are in favor of the dismantling.
“We must re-establish order,” said Klitschko. “All of us must live again under normal conditions. Everyone wants to have order in the country.”
Russia continues to amass military equipment at Ukraine’s border and keeps shelling from its own territory and sending in drone aircraft, said defense spokesman Andriy Lysenko at a briefing today in Kiev.
Lysenko also showed a video in which separatists allegedly were sending target coordinates of Ukrainian troop locations to Russia and said 13 soldiers have been killed in battle in the past 24 hours.
Yesterday, Ukraine threatened to block Russian oil and gas supplies to Europe in new sanctions against Russia, which it blames for the separatist uprising.
Ukraine, which no longer receives any gas from Russia but acts as a conduit for its neighbor’s European shipments, is considering a “complete or partial ban on the transit of all resources” across its territory, Prime Minister Arseniy Yatsenyuk told reporters yesterday in Kiev. It may also ban Russian planes from its airspace and cut defense-industry cooperation.
“There’s no doubt that Russia will continue its course -- started a decade ago -- aimed at banning imports of Ukrainian goods, limiting cooperation with Ukraine, pressure and blackmail,” Yatsenyuk said. “In the most negative scenario for Ukraine, losses during the first year may reach $7 billion, not only because of sanctions but also because of the Kremlin’s aggressive policy.”
Russia has banned food imports from Ukraine, the U.S., the European Union and other countries that have sanctioned it for what they say is stoking the worst geo-political crisis since the Cold War. Gas prices in western Europe rose on the news of Ukraine’s sanctions plan, which requires parliamentary approval.
“The sanctions were forced,” Putin spokesman Peskov said today. “We did not want them. They are retaliatory.” If new sanctions against Russia are approved, “we will retaliate,” he said.
Ukraine hasn’t received Russian gas since June 16, when OAO Gazprom cut its supplies in a debt and pricing dispute.
Ukraine transported 86.1 billion cubic meters of Russian natural gas and 15.6 million metric tons of oil last year, according to a February bond prospectus. That’s about half of Russia’s total gas exports, though less than 7 percent of oil shipments.
“That’s pretty significant, so I can see why prices are going crazy,” Trevor Sikorski, head of gas, coal and carbon at London-based consultants Energy Aspects Ltd., said by phone. “It is quite an extraordinary statement. Western European governments are not going to be happy with this.”
Gazprom stopped shipping gas through Ukraine for almost two weeks in 2009, leaving several EU states including Bulgaria and Slovakia without supplies. It has since worked on other transit routes, including opening Nord Stream, which pumps gas under the North Sea, in 2011. Gazprom also plans to complete the South Stream project with European utilities such as Italy’s Eni SpA and France’s Electricite de France SA, by 2019.
Russia also has routes to ship oil that bypass Ukraine, and restrictions would have a bigger effect on Ukraine’s budget and EU countries, Igor Dyomin, a spokesman for Russia’s oil pipeline operator, OAO Transneft, said by phone. The Russian Energy Ministry and Gazprom declined to immediately comment.
Ukrainian lawmakers will vote Aug. 12 on the sanctions bill, which was approved by the cabinet yesterday. It would enable the government to use 26 types of penalties, including possible asset freezes and bans on participation in state-asset sales.
The government put forward a list of 65 companies, mostly Russian, and 172 individuals against whom penalties might be imposed. Russia’s Energy Ministry is also assessing risks because of U.S. and EU sanctions and will take measures to bolster the oil and gas industry, including steps related to replacing sanctioned equipment, Energy Minister Alexander Novak said in a statement yesterday.
The one-year Russian restrictions on fish, meat, fruit, vegetables and dairy goods leave a $9.5 billion hole for domestic companies and developing nations such as Brazil to fill. The ban, which also applies to Canada, Australia and Norway, is designed to “protect national interests,” according to a decree signed by Putin.
--With assistance from Ilya Arkhipov and Jason Corcoran in Moscow.