Azernews.Az

By Bloomberg

European Union leaders started work on further sanctions to prod Russia to enforce the cease-fire in eastern Ukraine as fierce fighting focused on a crossroad town of Debaltseve.

German Chancellor Angela Merkel, one of the brokers of the peace deal in Minsk, Belarus, emerged as one of its biggest skeptics, calling it a “glimmer of hope” that risks crumbling like a previous truce between Ukraine and pro-Russian rebels.

“If there are difficulties, I don’t exclude additional sanctions,” Merkel told reporters after outlining the accord at a summit in Brussels late Thursday. She said EU leaders called on the European Commission to get further measures ready.

The EU response reflected concern that the cease-fire deal announced earlier Thursday after more than 18 hours of talks will only mark a pause in the war that has devastated eastern Ukraine and left thousands dead. The accord struck between Ukrainian President Petro Poroshenko and his Russian counterpart Vladimir Putin envisages a truce from midnight on Feb. 15 and reaffirms some commitments from a failed September bid to end the conflict.

The collapse of previous cease-fires has stoked doubts as to whether this one will hold. Ten months of fighting have killed more than 5,400 people, crushed Ukraine’s economy and propelled Russia toward a recession helped by U.S. and European sanctions.

Overnight Shelling

Ukraine said rebel shelling during the night was as intense as before, with the heaviest fighting near Debaltseve, a strategic transport hub on a road connecting the rebel-held areas of Donetsk and Luhansk, Anatoliy Stelmakh, a military spokesman, said Friday. The number of surveillance drones observed “increased significantly,” he said.

Eight Ukrainian soldiers were killed and 34 wounded overnight, according to Vladyslav Seleznyov, another military spokesman.

The U.S. doesn’t rule out imposing tougher sanctions or giving more security assistance to Ukraine if the Minsk deal isn’t fully implemented, according to American officials who briefed reporters on condition they weren’t identified.

Investor concerns about whether the truce will hold have been alleviated by optimism that Russia may avoid further sanctions.

Russian Stocks

The Micex Index of stocks advanced 2.2 percent on Thursday and another 1.1 percent on Friday by 10:38 a.m. in Moscow. The ruble has gained 2.9 percent this week against the dollar and the yield on the nation’s Eurobonds due March 2030 is down 69 basis points in the same period to 5.956 percent, according to data compiled by Bloomberg.

EU governments ratcheted up the sanctions gradually after Russia annexed Crimea from Ukraine last March, curbing European financing for Russian banks, halting the export of energy- exploration equipment and barring the sale of some defense- related goods.

What would trigger further restrictions was left open. EU decision-making procedures may work in Russia’s favor, since a unanimous vote by the bloc’s 28 governments is required to impose new sanctions or extend the current ones past their expiration in July.

The summit affirmed plans to put 19 more Russians and nine organizations on a blacklist on Feb. 16, despite objections by a handful of leaders. Currently 132 people and 28 organizations are on the list, which bars them from traveling to the EU or accessing European bank accounts.

French President Francois Hollande, the other co-broker of the Minsk accord, echoed Merkel in warning of more sanctions in the pipeline. He said the conditions are “not met” for France to deliver Mistral warships to Russia under a contract he suspended in September.

“In the best of hypotheses, the sanctions will be rolled back,” Hollande said. “But we are not there yet.”