Ukraine Rebuffs Rebels’ Cease-Fire Call; Sanctions Mulled

Ukraine’s military demanded that
pro-Russian rebels surrender and dismissed their offer of a
cease-fire, as lawmakers prepared to consider new sanctions that
may cut Russian shipments of natural gas to Europe.

“If there is an initiative, it should be implemented by
practical means, not only with words — by raising white flags
and putting down weapons,” Andriy Lysenko, a spokesman for the
country’s military, told reporters in Kyiv yesterday. “In that
case no one will shoot at them.”

Ukraine is trying to dislodge separatists from strongholds
in Donetsk and Luhansk as Russia raises the pressure on its
western neighbor to halt the campaign and allow immediate
assistance. President Vladimir Putin, who has been blamed by
Ukraine and its U.S. and European allies of stoking the
conflict, has said the fighting is creating a humanitarian
disaster and offered to provide aid.

As Ukraine wrestled with Russia over a military standoff,
the nation’s lawmakers prepared to vote tomorrow on a sanctions
bill that could block the transit of Russian oil and gas
supplies to Europe. The cabinet has approved the measure.

Ukraine no longer receives gas from Russia though acts as a
conduit for its neighbor’s European shipments, and a ban could
be “complete or partial,” Prime Minister Arseniy Yatsenuyuk
said last week. It also may ban Russian planes from its airspace
and cut defense-industry cooperation.

‘Will Retaliate’

Russia has responded to sanctions by banning food imports
from Ukraine, the U.S., the European Union and other countries.

If new sanctions against Russia are approved, “we will
retaliate,” Putin spokesman Peskov said.

As the army pushed toward Donetsk, Ukraine’s military
reported more desertions among militants, and said the town of
Panteleymonivka was cleared of rebels, according to a posting on
its Facebook page.

Government troops cut off regions of Donetsk and Luhansk
from one another, threatening resupply routes. Insurgents dug in
near the town of Illovaysk, armed with tanks, Grad missiles and
armored vehicles, and the military is preparing to storm the
area, according to the military.

A rebel leader had broached the possibility of a truce
during the weekend, saying in a statement that militants will
continue fighting if the government doesn’t end its offensive.
The Defense Ministry in Kyiv said the army continued to tighten
its encirclement of Donetsk, biggest city in the conflict zone.

‘Urgently Needed’

“A cease-fire isn’t only possible; it’s urgently needed,”
Russian Foreign Minister Sergei Lavrov told reporters in Sochi
yesterday. “Hospitals can’t function, there’s not enough
medications. That amounts to the most severe humanitarian
situation.”

As of noon local time yesterday, the atmosphere was
“extremely tense” in Donetsk, a city of 1 million people
before the conflict flared in mid-April, the council said in a
statement, adding that shells were heard hitting most areas.
More than 10,000 residents had no electricity late yesterday
after 40 substations were damaged by artillery, it said.

Luhansk hasn’t had power, water or phone service for more
than a week
, according to local authorities.

Red Cross

Russia is negotiating with Ukraine, the Red Cross and
humanitarian groups run by the United Nations about providing
urgent assistance, Lavrov said. “I’m certain we’ll be able to
agree on delivering this aid as soon as possible to those who
need it most,” he said.

Valeriy Chaly, deputy chief of Ukrainian President Petro Poroshenko’s administration, said a column of Russian soldiers
and army equipment stopped before crossing the border after
leaders asked the U.S., Russia and the Red Cross to intervene.
Chaly, in a statement Aug. 9 on Poroshenko’s website, called the
dispatching of the convoy a “very serious provocation.”

The Kremlin denied the claim.

Ukrainian officials and their allies had predicted Putin
would cloak an incursion of Russian troops into those areas as a
peacekeeping effort.

“There were no attempts made to penetrate” Ukrainian
territory “by Russian forces,” said Putin’s spokesman, Dmitry Peskov. “That’s why we find it difficult to understand what was
meant by the Ukrainian side.”

Leaders Talk

The prospect of a Kremlin intervention spurred talks among
world leaders who have imposed economic sanctions in a bid to
force Putin to de-escalate tensions.

U.S. President Barack Obama and German Chancellor Angela Merkel “agreed that any Russian intervention in Ukraine, even
under purported ‘humanitarian’ auspices, without the formal,
express consent and authorization of the government of Ukraine
is unacceptable, violates international law, and will provoke
additional consequences,” according to an Aug. 9 White House
statement.

The militants are “in panic” as government troops tighten
their encirclement of insurgents around Donetsk, Leonid
Matyukhin, a spokesman for the Ukrainian Defense Ministry, said
in a statement on Facebook.

The army inflicted losses and destroyed vehicles by firing
on rebel bases, while insurgents struck back by attacking
Ukrainian checkpoints, with artillery fire hitting Ukraine from
Russia, he said.

To contact the reporters on this story:
Kateryna Choursina in Kyiv at
kchoursina@bloomberg.net;
Ilya Arkhipov in Sochi, Russia at
iarkhipov@bloomberg.net;
Volodymyr Verbyany in Kyiv at
vverbyany1@bloomberg.net

To contact the editors responsible for this story:
Balazs Penz at
bpenz@bloomberg.net;
James M. Gomez at
jagomez@bloomberg.net
Steve Geimann, Jodi Schneider

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