Putin’s Good Cop Claim Hollow in Kiev as Rebels Widen War

Aug 28, 2014 8:57 am ET

(Updates with analyst under It’s ‘War’ subheadline. For more on the conflict in Ukraine, see EXT2.)

Aug. 28 (Bloomberg) -- Hours after Vladimir Putin hailed “positive” talks over the war in Ukraine, new accusations of Russian aggression were already being voiced in Kiev.

While the Russian president reiterated a pledge early yesterday to do all he can to bring peace to the war-torn Donetsk and Luhansk regions, officials in Ukraine said he was doing just the opposite. Russian soldiers have joined rebel fighters in mounting a counterattack, opening a new front against Ukrainian troops who are being shelled “intensively” from across the border, military spokesman Andriy Lysenko said.

The pattern has become a familiar one: Putin annexed the Black Sea peninsula of Crimea after saying he had no intention of doing so; a promise in Switzerland to help bring the separatists to heel preceded more intense fighting. The aim is to muddy the waters and reduce the risk of more penalties from the U.S. and Europe, according to Otilia Dhand, an analyst at Teneo Intelligence in London who specializes in eastern Europe.

“The Kremlin is playing a double game of sending out positive messages -- to reduce the risk international sanctions will be expanded while preparing for an escalation,” Dhand said by e-mail.

Putin met his Ukrainian counterpart, Petro Poroshenko, at a regional summit in the Belarusian capital Minsk on Aug. 26, their first face-to-face meeting since June. Russia “will do everything for this peace process,” Putin told reporters after the talks, while continuing to deny any Russian involvement in a conflict that’s already claimed more than 2,000 lives.

No Compromise

Poroshenko said all parties backed a Ukrainian peace plan at the talks, which included the Belarusian and Kazakh leaders as well as European Union foreign-policy chief Catherine Ashton. A “road map” will be drawn up and a three-way contact group involving the EU and Russia will work on a truce, he said.

The positive spin from Russia and Ukraine doesn’t amount to much, according to Fredrik Erixon, director of the European Center for International Political Economy in Brussels. All the talks produced was an agreement to hold more meetings, he said.

“The Kremlin’s long-term strategy is to destabilize Ukraine -- not to take over its territory but to keep it weak,” Erixon said today by phone. “The notion that you reach a compromise deal with Putin through more talks, well, I just don’t see that.”

Intensified Fighting

Fighting on the ground in Ukraine’s easternmost regions is intensifying, not ebbing. Ukraine maintains Russia is supplying the rebels with arms, financing and manpower that now includes regular troops. Russian servicemen are among a group of fighters that seized a village inside the Donetsk region, according to Lysenko.

Overnight incursions in eastern Ukraine suggest a “Russian-directed counteroffensive is likely under way” in Donetsk and Luhansk, U.S. State Department spokeswoman Jen Psaki told reporters in Washington yesterday.

Russia is more openly backing the Ukrainian separatists, now with small military formations moving into Ukraine’s territory, a senior NATO diplomat told reporters in Brussels, speaking on the condition of anonymity.

The Kremlin has provided artillery and rocket support for rebels, from positions on both sides of the countries’ shared border and SA-22 surface-to-air missiles now being deployed are more sophisticated than the SA-11 missiles that downed a Malaysian airliner in July, the diplomat said.

It’s ‘War’

“This is the beginning of an open Russian invasion using regular army units to fend off Ukraine’s military in the two eastern provinces,” Ievgen Vorobiov, an analyst at the Polish Institute of International Affairs in Warsaw, said today by phone. “This is war.”

Putin’s spokesman, Dmitry Peskov, speaking to reporters in Moscow, said the NATO “statements are not new. Russia regularly denies these allegations.”

“We are not interested in pulling” the Ukrainian “state apart,” Russian Foreign Minister Sergei Lavrov said, adding that the rights of Russians should be defended everywhere.

Ukraine on Aug. 26 released a video of Russian paratroopers captured after traveling in an armored column 15 kilometers (9 miles) over the border. While Putin said they accidentally strayed over the frontier, the Defense Ministry in Kiev said later that part of the column remains in Ukraine and is shelling the army from positions in three villages.

‘Loud Statements’

“For the past half year we’ve heard very many loud statements from Russia but so far we’ve not seen any concrete action,” Foreign Ministry spokesman Yevgen Perebyinis told reporters in Kiev. “These words by Russia’s leaders could become reality in one day by giving the order to its military to leave Ukrainian territory and to close the borders.”

There’s still reason for optimism, according to Vladimir Tikhomirov, chief economist at BCS Financial Group in Moscow. With expectations low before the Minsk talks, the fact the two sides decided to continue talking is “a good thing,” he said.

“Although breakthrough agreements are still some time away, we expect to see more progress in the political, military and economic and trade areas in the next few weeks,” Tikhomirov said in a research note. “With the negotiation process now started, a new wave of Russia-West confrontations has become less likely.”

No Bystander

The U.S. and its allies aren’t buying Putin’s claim that he’s just an innocent bystander. They’ve imposed financial restrictions on some of his closest allies, including billionaire Gennady Timchenko, and several of the country’s biggest companies, including oil champion OAO Rosneft. Those measures have helped push Russia’s already flagging $2 trillion economy to the edge of recession.

The Obama administration said last week that Russia violated Ukraine’s sovereignty by sending in a convoy of humanitarian-aid trucks without government permission and risks deeper sanctions if they’re not removed. The convoy has since left Ukraine, though Russia says another is planned.

Russia’s Micex Index sank 1.9 percent by 3:39 p.m. in Moscow, while the ruble plunged 1.6 percent to an 11-year low against the dollar, data compiled by Bloomberg show. Ukraine’s dollar-denominated 2017 government debt fell, pushing the yield up 97 basis points to 11.902 percent, the highest since May.

There’s little reason to be hopeful about ending this war, said Vladimir Pribylovsky, head of the Moscow-based Panorama research group. Given that the two sides couldn’t even agree in Minsk on “basic facts” such as Russia’s involvement, there’s not much to discuss, he said.

“Putin is leaning on the old good cop-bad cop trick,” Pribylovsky said by phone. “While reality points to an aggressive Russia, Putin is trying to show he’s a reasonable partner.”

--With assistance from Leon Mangasarian in Berlin, Jake Rudnitsky in Moscow and David McQuaid in Warsaw.