MacroScope

Putin unmoved by carrots or sticks

By Mike Peacock
March 7, 2014

Vladimir Putin said this morning Russia and the United States are still far apart over Ukraine. Moscow, he said, could not ignore “illegitimate decisions” imposed on the east and south of the country and calls for help by ethnic Russians there but the two powers should not sacrifice relations over it.

In an hour-long telephone call last night Barack Obama urged Putin to accept the terms of a potential diplomatic solution to the crisis whereby Moscow would keep its military bases in Crimea while respecting Ukraine’s sovereignty. But he also ordered sanctions – including travel bans and freezing of assets in the U.S. – on people responsible for Moscow’s intervention in Ukraine though Putin himself is not on the list.

Obama also said a Crimean referendum on joining Russia, called for 9 days’ time, violated international law.
Meanwhile, Congress passed a $1 billion loan guarantees package for the new government in Kiev. The European Union has already promised some $15 billion over the next two years, contingent on a deal being signed with the IMF.

In terms of sticks not carrots, the EU stopped a little short of Washington. An emergency summit of the bloc’s leaders condemned Russian actions in Crimea as illegal but took only minor steps, suspending talks with Moscow on visas and a new investment pact while warning of tougher measures if there is no negotiated solution soon.

French Foreign Minister Laurent Fabius has just said that if a first round of sanctions prove insufficient, a second wave could target businesses and individuals including people close to Putin.

After talks in Rome, U.S. Secretary of State John Kerry said Russian Foreign Minister Sergei Lavrov would personally deliver proposals to Putin to end the crisis. Putin will attend the opening of the Paralympics in Sochi and notice a distinct dearth of foreign dignitaries to meet and greet.

There’s been no repeat of Monday’s market meltdown in Russian assets but the rouble and stock market are down a little.
Vitaly Klitschko, who led the opposition to ousted president Yanukovich, and Petro Poroshenko, one of the country’s wealthiest people, meet French President Hollande in Paris later.

Also worth watching a meeting of foreign ministers of five Nordic, three Baltic and the four Visegrad countries (the Poles, Czechs, Hungarians and Slovaks who essentially neighbour Ukraine to the west) in a remote part of Estonia.

Former Ukrainian premier Yulia Tymoshenko, recently freed from jail, attended a meeting of the EU’s centre-right European People’s Party grouping in Dublin which features a mega cast list – Jose Manuel Barroso, Herman Van Rompuy, Angela Merkel, Mariano Rajoy, Enda Kenny, Antonis Samaras, Jyrki Katainen, Pedro Passos Coelho and Viktor Orban.

She briefed the leaders last night and urged the bloc to sign its association agreement with Ukraine which Yanukovich walked away from last year.

The main business of the EPP meeting is to elect its candidate to head the EU’s executive. Veteran Luxembourg politician Jean-Claude Juncker has won the backing of Germany’s major conservative party in the race to become European Commission president.

As an arch federalist, his candidature will be anathema to Britain but it has opted out of the EPP grouping. Britain’s David Cameron must calculate whether his backing for any candidate for the top jobs would scupper their chances.

Whichever political group emerges as the largest bloc in parliament following the May 22-25 elections is expected to have first claim on the presidency post, although the choice also has to be approved by EU leaders and history shows a compromise candidate has often come up to sneak it on the line.

The Socialists and Democrats (PES), currently leading in the polls, have selected Germany’s Martin Schulz, the president of the European Parliament, as their candidate. The Brits and others would be even more aghast if he took the helm and could well block both him and Juncker once the horse trading begins in earnest after May’s elections.

German industry output for January will be the big economic figure for the day after a 1.2 percent rise in industrial orders was reported on Thursday. Output fell by 0.6 percent in December and is expected to recoup that drop and maybe more.

Ratings Friday will bring reviews of the Netherlands and Belgium by Moody’s.

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