WRAPUP 2-Putin calls on Ukraine rebels to put off secession vote


(Adds NATO, analyst comment)

* Putin call comes five days before vote

* Separatists to consider call on Thursday

* Kremlin leader says Russian forces pulled back

* NATO sees no sign of withdrawal

By Matt Robinson and Darya Korsunskaya

DONETSK, Ukraine/MOSCOW, May 7 (Reuters) – Russian President
Vladimir Putin called on pro-Moscow separatists in Ukraine to
postpone a vote on secession just five days before it was to be
held, potentially pulling Ukraine back from the brink of
dismemberment.

It was the first sign the Kremlin leader has given that he
would not endorse a referendum planned for Sunday by pro-Russian
rebels seeking independence for two provinces with 6.5 million
people and around a third of Ukraine’s industrial output.

In what suggested a breakthrough in the worst crisis between
East and West since the Cold War, Putin also announced he was
pulling Russian troops back from the Ukrainian border.

However, a senior NATO official said the Western alliance
had not seen any signs of a Russian pull-back from the frontier,
where Moscow has massed tens of thousands of troops, proclaiming
the right to invade Ukraine to protect Russian speakers.

“We call on the representatives of southeastern Ukraine, the
supporters of the federalisation of the country, to postpone the
referendum planned for May 11,” Putin said.

He said this would create conditions for dialogue between
the Ukrainian authorities in Kyiv and the separatists.

“We’re always being told that our forces on the Ukrainian
border are a concern. We have withdrawn them. Today they are not
on the Ukrainian border, they are in places where they conduct
their regular tasks on training grounds,” Putin said.

The NATO official told Reuters in Brussels: “We have no
indication of a change in the position of military forces along
the Ukraine border.”

Putin spoke in Moscow after talks with the head of the
Organization for Security and Cooperation in Europe, who said
the security and rights body would soon propose a “road map” to
defuse the Ukraine crisis.

PEOPLE’S ASSEMBLY

A pro-Russian separatist leader said the separatists would
consider Putin’s call to postpone their referendum at a meeting
of their self-proclaimed People’s Assembly on Thursday.

“We have the utmost respect for President Putin. If he
considers that necessary, we will of course discuss it,” Denis
Pushilin told Reuters in Donetsk, a city of 1 million people
which the rebels have proclaimed capital of an independent
“People’s Republic of Donetsk”.

Since a pro-Russian president was ousted in an uprising in
February, Putin has overturned decades of post-Cold War
diplomacy by proclaiming the right to send troops to Ukraine and
seizing and annexing Crimea.

A rebellion in the east has raised the prospect that
Ukraine, a country of around 45 million people the size of
France, could be carved up or even descend into civil war,
pitting Russian-speaking easterners against pro-European
Ukrainian speakers in the West.

Residents in areas held by the pro-Moscow rebels were
stunned by Putin’s remarks at a time when the region seemed to
be hurtling towards inevitable independence and a week of
bloodshed had brought animosity towards Kyiv to a fever pitch.

“Maybe Putin doesn’t understand the situation? There is no
way this referendum isn’t happening,” said Natalia Smoller, a
pensioner who has been bringing food to rebels manning a
roadblock in Slaviansk, a town turned into a fortified redoubt
where fighters withstood a government advance this week.

“There’s no turning back now. We won’t retreat. This either
ends with our victory or – it doesn’t bear thinking about.”

Nevertheless, experts predicted the separatists would heed
Putin’s call to stand down for now.

“Among those confronting Ukrainian troops, a certain logic
should prevail under which they understand that without the
support of Russia and thereby the Russian army, they could be
subjected to heavy military strikes,” said Yevgeny Minchenko, a
political analyst friendly to the Kremlin.

RUSSIAN SHARES SURGE

Russian share prices surged after Putin’s remarks, seen as
reducing the likelihood of damaging new sanctions. The MICEX
index shot up 3.64 percent.

Ukraine’s government and its Western allies have urgently
sought to halt the referendum, which they feared would lead to a
repeat of Russia’s annexation of Crimea in March but on a much
larger scale. U.S. Secretary of State John Kerry has called the
proposed referendum “contrived and bogus”.

Ukrainian government troops have launched a military
campaign to retake territory held by separatists this week.
Troops briefly captured the rebel-held city hall in the eastern
port of Mariupol overnight, but quickly abandoned it, leaving it
back in the hands of the separatists.

A week of violence in the east and in the southern city of
Odessa, where more than 40 people died in clashes that ended
with pro-Russian demonstrators trapped in a burning building,
has hardened positions and spread the unrest.

The United States and European Union, which have so far
imposed limited sanctions Russian individuals and small firms,
have threatened to impose much wider sanctions if Moscow took
further steps to interfere in Ukraine. Sunday’s planned
referendum was seen as a potential trigger.

Moscow has denied Western accusations that it was
orchestrating the rebellion in Ukraine’s east, where Ukrainian
forces have been largely unable to reassert control.

TERRITORIAL AMBITIONS

But the seizure of Crimea has been greeted with a wave of
patriotic enthusiasm in Russia and Putin has hinted at wider
territorial ambitions, referring to southern and eastern Ukraine
last month as “New Russia”, a term used in tsarist times.

In Mariupol, where Ukrainian forces briefly recaptured the
rebel-held city hall overnight, witnesses said the soldiers left
after smashing furniture and office equipment. The smell of tear
gas hung in the air inside the building which was largely empty
in the morning, with activists in gas masks clearing debris.

Pro-Russian activists were rebuilding barricades outside the
building where separatist flags flew and patriotic songs blared
from loudspeakers.

“They don’t want us to hold our referendum, but it’s our
right. That’s democracy,” a man named Alexander said, before
Putin’s remarks. “We could have negotiated but they won’t even
talk.”

The prospect that further sanctions might be imposed on
Moscow has already hurt Russia’s economy indirectly by scaring
investors into pulling out capital and forcing the central bank
to raise interest rates to protect the rouble.

A range of European companies that do business in Russia –
as diverse as Italian appliance maker Indesit, Danish
brewer Carlsberg, Finnish tyre maker Nokian Tyre
and Swedish cosmetics firm Oriflame –
announced results on Wednesday that blamed the crisis for
hurting their bottom lines.

French bank Societe General wrote down the value
of its Russian arm Rosbank by $730 million, blaming the economic
uncertainty caused by the Ukraine crisis.

Russia’s Finance Ministry predicted on Tuesday that the
economy would shrink for a second quarter in a row, putting the
country officially in recession.

(Writing by Peter Graff; Editing by Giles Elgood)