(Updates with tanks destroyed in second paragraph, markets in fifth. For more on the conflict in Ukraine, see EXT2.)
Aug. 25 (Bloomberg) -- Ukraine said an armored column including 10 tanks entered from Russia early today as the government in Moscow unveiled plans to send a second convoy with humanitarian aid into its neighbor’s rebel-held territory.
Government forces destroyed two tanks, captured crew members and seized other vehicles from the column that was flying separatist banners, Andriy Lysenko, a spokesman for Ukraine’s military, told reporters in Kiev today. Russian Foreign Minister Sergei Lavrov said he had no information about the incident and accused Ukraine of providing “a lot of disinformation about our invasions.”
Talks scheduled for tomorrow between the leaders of Russia and Ukraine are bringing no respite to the conflict that the United Nations says has left at least 2,000 dead since President Vladimir Putin annexed Crimea in March. Lavrov called on the Red Cross and Ukraine to help with the second delivery of assistance as the humanitarian situation continues to deteriorate in the war-torn regions.
“Russia is looking to go into tomorrow’s negotiations with the strongest possible hand,” Alexei Makarkin, a deputy director at the Moscow-based Center for Political Technologies, said today by phone. “The Kremlin’s moves to boost the rebels’ position and Lavrov’s hard-line statements, while seeming to contradict Russia’s stated desire to reach a deal, are aimed at entering the talks from a position of strength.”
The ruble and Russian government bonds fell for a second day. The yield on benchmark notes maturing February 2027 rose one basis point to 9.37 percent, while the currency weakened 0.2 percent to 36.1875 against the dollar. The Micex stock index gained 0.6 percent to 1,454.67 by the close in Moscow. Ukrainian markets were closed for a holiday.
Putin and Ukrainian President Petro Poroshenko will attend talks with European Union representatives in the Belarusian capital of Minsk during a summit of the Russian-led Customs Union. No separate bilateral meeting is yet planned between them, according to Lavrov.
Russia has informed Ukraine of plans to dispatch another column of trucks this week, with the convoy taking the same route through rebel-held territory as the tractor-trailers that returned to Russia two days ago, Lavrov told reporters in Moscow today. The U.S. and the European Union condemned the decision to send the first convoy of about 280 trucks, which the government in Kiev called an “invasion” after it crossed the border without authorization.
The new delivery of aid by Russia needs Ukraine’s agreement and should allow for the Red Cross to control the distribution of humanitarian cargo, Didier Burkhalter, chairman of the Organization for Security and Cooperation in Europe, said today in Tallinn.
“We want to coordinate our actions with Ukrainian authorities, which are also planning to send additional humanitarian aid to the southeast,” Lavrov said. “We’ll work on ensuring security guarantees from the side of the militias.”
Tensions continued to flare in the border areas, with the Ukrainian military saying that Russians disguised as insurgents tried to infiltrate the country and the column of armored vehicles crossed the frontier.
Border troops stopped the advance of the armored column into Ukraine from Russia, blocking the main roads as it tried to move toward the port city of Mariupol in the southern Donetsk region, according to a statement. Ukraine has said there’s a buildup of Russian military equipment along its border.
The village of Komuna in the Donetsk region was shelled by rebels using Grad missiles, Lysenko said. Government troops engaged rebels 39 times in the past day as clashes left four soldiers killed and 31 wounded, he said today.
The Ukrainian army beat back attempted counterattacks by insurgents in the main population centers of Donetsk and Luhansk, as well as in Ilovaysk and Rovenki, Lysenko said. The country’s air force also destroyed a column of rebel vehicles in the region, inflicting “severe losses” on the separatists, he said.
While Russia has repeatedly denied any involvement in the conflict, the U.S. and its EU allies say Putin is supplying the insurgents with weapons, manpower and financing and say he could stop the war if he reined in the separatists.
NATO Secretary General Anders Fogh Rasmussen said last week that Russia made an “incursion” into Ukraine and that the military alliance sees a continuous flow of Russian weapons into the country. The Ukrainian government said Aug. 15 its army destroyed part of a column of military vehicles that crossed the border from Russia.
Celebrating the 23rd anniversary of independence from the Soviet Union yesterday, soldiers, armored vehicles and missile launchers passed down the main Khreshchatyk thoroughfare in the Ukrainian capital, with some sent to the frontline from the parade.
Insurgents in Donetsk countered by forcing captured Ukrainian soldiers to walk through the city center at gunpoint and displaying incinerated hardware lost by government troops. The parade of prisoners, who were showered with insults by onlookers, was “a blatant violation of the laws of war,” Ole Solvang, researcher and security adviser for Human Rights Watch, said in a statement.
Lavrov said he saw no humiliation of Ukraine’s prisoners of war at the event.
Speaking at the parade in Kiev, Poroshenko announced a military spending increase, pledging to allocate more than 40 billion hryvnia ($3 billion) in 2015-2017.
“Unfortunately, there will always be a military threat to Ukraine,” Poroshenko said. “War has come from the side nobody expected.”
German Chancellor Angela Merkel, who met Poroshenko in Kiev two days ago, said “one big breakthrough” is unlikely at talks between him and Putin tomorrow. Lavrov said the talks will focus on economic ties, the humanitarian crisis and the prospects for a political resolution in Ukraine.
Ukraine, which agreed to a $17 billion bailout with the International Monetary Fund in May, may need as much as $8 billion in additional external aid during the next two years to finance the mounting costs of war, military revamp and reconstruction in the east, Chris Weafer, a founder of Macro Advisory in Moscow, said by e-mail.
Putin and Poroshenko have both “tried to strengthen their respective positions in recent weeks, but both are under increasing pressure to bring an end to the conflict,” he said. “The problem remains that neither wants, nor can afford, to be seen as a loser in the conflict.”
--With assistance from James G. Neuger in Brussels, Patrick Donahue and Daryna Krasnolutska in Kiev, Tony Czuczka in Berlin, Jake Rudnitsky and Ksenia Galouchko in Moscow and Ott Ummelas in Tallinn.