Thursday, May 8, 2014

Ukraine Updates May 8 , 2014 -- Russia and Putin's call for the Referendums in Donetsk and Lugansk to be postponed ( rejected by The People's Republic of Dontesk ) , as well as Putin's call for the military Operation ongoing in South Eastern Ukrainian Regions ( rejected by the West and Kiev ) have fallen on deaf ears . So , how can further sanctions creditably be imposed on Rusia moving forward ? Kiev's last minute offer of dialogue probably has come too late in the game and after too much blood has been spilled - so we are set for a tension filled weekend for sure . After the votes - what will Russia do ? Naturally between now and the voting anything can happen and probably will ( note the destruction of ballot and voting equipment in Donetsk today ! )

"New Russia" - Is This What East Ukraine Will Soon Look Like?

Tyler Durden's picture

As "The Russian Spring" spreads across various sub-regions of current non-Russian sovereign nations, Russian historian Sergey Lebedev warns thatTransdniestria is “the first liberated part of Novorossiya,” Putin’s term for what he sees as a new state spreading across Ukraine into Moldova and perhaps beyond... here is what that region will look like... welcome to Novorossiya, or as one would translate it... New Russia.

Lebedev’s article highlights two directions of Putin’s policies, both of which should be of concern not only in the region but in Europe and the West more generally.

On the one hand, to the extent that Transdniestria is a model for some putative Novorossiya, it presents a very ugly picture.

Transdniestria under its breakaway government has been one of the most repressive places in the former Soviet space and has a thoroughly criminalized government that has been prepared to sell off the enormous arms cache there left over from USSR times to all and sundry, including terrorist groups.

And on the other, itunderscores that Putin’s plans are far broader than Ukraine and involve a thrust into the Balkans. Were Transdniestria to be taken from Moldova and annexed to Russia, that would almost certainly lead to the collapse of the Moldovan state, the unification of part of it with Romania, the federalization of that country, and the extension of a Moscow-sponsored arc of instability into the Balkans.


Sanctions are not enough to “change Putin’s calculus,” as even American officials are beginning to acknowledge.And given the dangers that allowing him to move even further west into Moldova and beyond would inevitably entail, the time to contain and then reverse what he is doing is now.
Meanwhile Victoria Nuland, giving testimony in the house... was not backing down...

East Ukraine "Defies" Putin, Will Hold Independence Referendum

Tyler Durden's picture

Yesterday, when like clockwork the algos were fooled by the latest "de-escalation" fig leaf offered by Russia, in which Putin casually threw it out there that east Ukraine should postpone its referendum sending the stock market surging, we said "naturally, since there will be no delay as Kiev does not even bother to discuss the referendum while Donetsk will push on but certainly aware of Putin's distance-providing "reservation", Putin will "sadly" have to accept the referendum results."Less than 24 hours later we are proven right once more when moments ago the head of the elections commission of the so-called Donetsk People's Republic, Denis Pushilin, said the decision was unanimous to go ahead with Sunday's vote as planned. So much for that, and indeed, Putin will "sadly" have to accept the Donetsk decision to become independent, and most likely ask Russia to protect it, in less than a week.
Or, as a NYT reporter summarized our forecast after the fact:

Donetsk and Lugansk will hold referendums as planned. Kiev will continue anti-terror op as planned. And Moscow can say it tried...

A pro-Russia insurgency in eastern Ukraine decided Thursday to go ahead with a referendum on autonomy despite a call from Russian President Vladimir Putin to delay the vote.

Putin on Wednesday had urged them to delay the referendum, which many fear could be a flashpoint for further violence between Ukrainian troops and the pro-Russia militants who have seized government buildings in about a dozen cities in eastern Ukraine.

Pushilin said the suggestion to postpone the vote "came from a person who indeed cares for the people of the southeast" of Ukraine. "But we are the bullhorn of the people," he said.

The organizers have said the referendum was on whether to give the eastern regions more autonomy within Ukraine, but they have left open the possibility of using it to seek independence or annexation by Russia.

Putin's comments had appeared to be an effort to step back from confrontation with the West over Ukraine. He also declared that Russia has pulled its troops away from the Ukrainian border, although NATO and Washington said they saw no signs of this.

Putin also spoke more positively about the Ukrainian interim government's plan to hold a presidential election on May 25, calling it a "step in the right direction," but reiterated Russia's long-standing contention that it should be preceded by constitutional reforms.

His spokesman, Dmitry Peskov, added on Thursday that the election could only be considered legitimate if Ukraine stops its "punitive operations" in the east and begins a national dialogue on resolving the crisis, the Interfax news agency reported.
And with that perfectly anticipated distraction aside, we can go back to what we yesterday called is "The Next Big Catalyst: East Ukraine May Be Officially Independent In Seven Day."Make that six days.

( Just your routine , prepping for nuclear war drills , nothing to see here ..... move along )

Russia Launches Two ICBMs, Rebuffs "Simulated Massive Nuclear Strike" As Part Of Military Drill

Tyler Durden's picture

Remember when Putin "de-escalated" and promised the Russian forces were being pulled back from the Ukraine border? That didn't last long. Fast forward 24 hours, when we learn that the very same Putin oversaw a military exercise involving Russia's nuclear forces.
While Putin said the exercise had been planned back in November, it comes as relations between Russia and the West have plunged to their lowest point since the Cold War over Ukraine.

Putin, speaking from the Defense Ministry's headquarters where he oversaw the exercise along with leaders of several ex-Soviet nations which are members of the Collective Security Treaty Organization, said that the maneuvers involved the military across the entire Russian territory, including the nation's nuclear forces.

Russian news wires said that the exercises simulated dealing a massive retaliatory nuclear strike in response to an enemy attack. The description of the exercise is unusually blunt, reflecting tensions with the West running high over Ukraine.

As part of the maneuvers, a Topol intercontinental ballistic missile launched from the Plesetsk launch pad in northwestern Russia successfully hit a designated target on the Kura testing range on the far eastern Kamchatka peninsula, the military said.

Two nuclear submarines of the Northern and Pacific Fleets, the Tula and the Podolsk, also fired intercontinental ballistic missiles.
So, what distraction will those who are selling into idiot hands to push stocks higher use today?

Moscow's roadmap for Ukraine settlement sees mixed response

Published time: May 08, 2014 01:40
Edited time: May 08, 2014 03:20

Moscow’s call on pro-federalization protesters in Ukraine to postpone the referendums was welcomed by the West and Kiev, yet they still do not recognize the need to halt the military op in southeast as a prerequisite for national dialogue and elections.
Ukraine presidential hopeful Pyotr Poroshenko (UDAR Party) has welcomed President Vladimir Putin’s statements, saying that the situation significantly improved following the news from Moscow. “We have an appeal to stop an illegal referendum, Russia accepting presidential elections. I think this is great news for stabilizing the situation in eastern Ukraine,” Poroshenko told reporters in Berlin.
On Wednesday, Putin called the presidential election in Ukraine, now scheduled for May 25, “a move in the right direction” adding however it would mean nothing unless all citizens of Ukraine have a full understanding of how their rights would be guaranteed afterwards.
The direct dialogue between Kiev and representatives of the southeastern regions is the “key element” of settling the conflict, Putin said, supported on this by the OSCE Chairperson-in-Office and Swiss President Didier Burkhalter. In order to “create the necessary conditions for this dialogue,” Putin urged rescheduling of the referendum planned by anti-government protesters to determine the future of southeastern Ukraine.
However, for a dialogue to succeed, a ceasefire and halt of any violence should take place by all the military, paramilitary and illegal radical armed groups, Putin added. “Russia urgently appeals to the authorities in Kiev to cease immediately all military and punitive operations in southeast Ukraine,” he said.
Armed men in Ukrainian military uniforms stand guard beside an armoured personnel carrier at a checkpoint in Mariupol, eastern Ukraine May 7, 2014. (Reuters/Marko Djuric)
Armed men in Ukrainian military uniforms stand guard beside an armoured personnel carrier at a checkpoint in Mariupol, eastern Ukraine May 7, 2014. (Reuters/Marko Djuric)

Russia is not responsible for the deepening crisis in Ukraine, Putin reiterated, reciting concrete steps it made to de-escalate tensions.
“We have been told that our troops by the Ukrainian border are a concern – we have withdrawn them. They are now not near the border, but at locations where they conduct regular drills at ranges,” he said. “This can be easily verified using modern intelligence techniques, including from space, where everything can be seen.”
“We helped to secure the OSCE military observers’ release and I think also made a contribution to defusing the situation,” he added.
The President of the European Council, Herman Van Rompuy, noted on Wednesday evening that a “genuine national dialogue and the cessation of acts of violence and provocations are essential elements in advancing towards a political solution.”
“I take note of President Putin's recent statements signalling a willingness to de-escalate the situation, including his call to refrain from holding a referendum in the Eastern part of Ukraine and the stated withdrawal of Russian troops from the borders of Ukraine,” Rompuy said.
The United States however claimed that, although being a step forward, is not enough and Russia should try harder to deescalate tensions in Ukraine.
“It is a helpful step but again there is far more the President Putin and the Russians can do to deescalate the situation and to ensure safe elections,” US State Department spokeswoman Jen Psaki told journalists on Wednesday evening, without elaborating on which other moves she was expecting from Russia.
A man and boy stand in front of a Ukrainian armoured personnel carrier at a checkpoint in Mariupol, eastern Ukraine May 7, 2014. (Reuters/Marko Djuric)
A man and boy stand in front of a Ukrainian armoured personnel carrier at a checkpoint in Mariupol, eastern Ukraine May 7, 2014. (Reuters/Marko Djuric)

Shortly afterwards Ukraine’s foreign ministry issued a statement welcoming the “important role of the OSCE in international efforts aimed at de-escalating the situation” but saying that Moscow was hiding “support for terrorist actions against Ukrainian citizens” behind the façade of “good faith gesture.”
“A full-scale national dialogue… is an absolute priority of the Government of Ukraine,” the ministry’s statement reads.“However, a dialogue with terrorists is impermissible and unconceivable. Protection of peoples’ lives and elimination of terrorism which undermines any possibility of the dialogue is the goal of the anti-terrorist operation being conducted in certain locations in the east of our country.”

Residents gather to speak to Ukrainian soldiers at a checkpoint which they seized in the early morning in the village of Andreevka, 7 kms from the centre of the southern Ukrainian city of Slavyansk, on May 2, 2014. (AFP Photo)
Residents gather to speak to Ukrainian soldiers at a checkpoint which they seized in the early morning in the village of Andreevka, 7 kms from the centre of the southern Ukrainian city of Slavyansk, on May 2, 2014. (AFP Photo)

The OSCE was ready to take responsibility for coordinating the “roadmap” to resolve the crisis and negotiations with the US and the EU would be taking place soon, Burkhalter said earlier. But Ukraine’s FM stated that discussion of the peaceful settlement in Ukraine “without Ukraine” is“senseless and unacceptable.”
Representatives of the southeast in the meantime said they were ready for negotiations with Kiev and would on Thursday discuss possible rescheduling of the referendum.
But neither those in power in Kiev, nor the United States seem to be interested in accepting any kind of roadmap that could bring about peaceful solution to the crisis, Lawrence Freeman of the Executive Intelligence Review magazine told RT.
“You have to keep in mind that the US State Department and in particular Victoria Nuland, who has been behind this coup since the end of last year, these are people who are actually running the show. And they want to force a confrontation. They’ve been lying about the entire situation since February 21-22… have not been telling the truth about who is actually responsible for the confrontations in Kiev and in Eastern Ukraine,” Freeman said.
The roadmap proposed by President Putin and the OSCE chief, Freeman believes, is the best way of ”avoiding the confrontation” some would like to have with Russia.
“I think President Putin is actually strategically handling the situation quite well. Because he knows that there are people who would like to use this conflict to escalate to major war. So he is outmanoeuvring the actual people behind this,” Freeman said.
If authorities in Kiev are really worried about Ukraine’s future as a country and its territorial integrity, Freeman says they have no other choice but stop their full-scale military operation against the population in the southeast.
“They have to, if they want to have a country,” he said. “They cannot allow neo-Nazis and right-wing fascists to run the country, to be part of security and military operation. If they want to be a country – they can’t do that.”

Donetsk activists to hold referendum on May11 as planned

Published time: May 08, 2014 09:50

The council of the Donetsk People’s Republic won’t postpone the referendum on their region's future as part of Ukraine, and will hold it as planned on May 11, said DPR officials.
“This is not our decision [of the politicians] , this is the decision of people of Donbas region,” said Andrey Purgin, one of the leaders of the self-proclaimed Donetsk People’s Republic, “People of Donbas [Region] got their chance to make a heroic deed and we can’t deprive them from this chance.”
The decision of holding a referendum as scheduled was approved on the council of People’s Republic of Donetsk unanimously.
Meanwhile, the council of the People’s Republic of another eastern Ukrainian city of Lugansk have decided not to postpone their upcoming referendum either, and to go ahead and organize it on May 11.
In April, activists in the Donetsk and Lugansk regions, announced they were planning to hold a referendum on their regions’ future as part of Ukraine on Sunday, May 11.
On Wednesday, Russian President Vladimir Putin called on anti-government protesters in southeastern Ukraine to postpone their May 11 federalization referendums.
“We are calling for southeast Ukraine representatives, supporters of federalization of the country, to postpone the May 11 referendum to create the necessary conditions for dialogue,” Putin said at a press conference with OSCE Chairperson-in-Office and Swiss President Didier Burkhalter in Moscow.

2 southeast Ukrainian regions to hold referendum May 11 as planned

Published time: May 08, 2014 09:50
Edited time: May 08, 2014 11:36

RIA Novosti / Natalia Seliverstova
RIA Novosti / Natalia Seliverstova
The councils of the People’s Republics of two southeastern cities of Donetsk and Lugansk won’t postpone the referendums on their regions’ future as part of Ukraine and will hold them as planned on May, 11, the cities’ anti-government activists said.
“This is not our decision [of the politicians] , this is the decision of people of Donbas region,” said Andrey Purgin, one of the leaders of the self-proclaimed Donetsk People’s Republic, “People of Donbas [Region] got their chance to make a heroic deed and we can’t deprive them from this chance.”
The decision of holding a referendum as scheduled was approved on the council of People’s Republic of Donetsk unanimously.
“People don’t trust Kiev authorities,” Miroslav Rudenko, one of the Donbas self-defense leaders, told Interfax, “Also the reaction of [coup-appointed PM Arseny] Yatsenyuk to the proposal of Russian President [calling for an end to Kiev’s military operation] was inadequate.”
According to another self-defense leader Denis Pushilin, “the region’s people are determined to organize the referendum.”
“There are millions of people who are ready to cast their votes,” he added.
Meanwhile, the council of the People’s Republic of another eastern Ukrainian city, Lugansk, has decided not to postpone the upcoming referendum and to organize it on May 11, said Vasily Nikitin, from the press service which is organizing the referendum.
“The referendum will take place as planned. The ballots have been already arrived at the polling stations,” said Nikitin.
According to him, at the referendum people will be asked if they “support the state independence of People’s Republic of Lugansk.”
He also added that the results of the referendum on the region’s future will be announced Monday.
Leonid Slutsky, the Chairman of the Russia’s State Duma Committee on the Commonwealth of Independent States, said that the refusal of Donetsk and Lugansk regions to postpone the upcoming referendums is their sovereign right.
Russia by proposing to postpone the referendums wanted only to “solve the conflict peacefully and not to allow further escalation of crisis in Ukraine,” he said.
He added that Russia won’t send observers to Donetsk and Lugansk as these referendums are“their internal affair.”
In April, activists in the Donetsk and Lugansk regions, announced they were planning to hold a referendum on their regions’ future as part of Ukraine on Sunday, May 11.
On Wednesday, Russian President Vladimir Putin called on anti-government protesters in southeastern Ukraine to postpone their May 11 federalization referendums.
“We are calling for southeast Ukraine representatives, supporters of federalization of the country, to postpone the May 11 referendum to create the necessary conditions for dialogue,” Putin said at a press conference with OSCE Chairperson-in-Office and Swiss President Didier Burkhalter in Moscow.
Kiev on Thursday said the military operation in the south-east of Ukraine will continue, regardless of the decision made on the regional referendum.
Earlier Thursday, the head of Ukrainian National Security and Defense Committee, Andrey Parubiy, said that the military operation in the southeast of Ukraine will continue, regardless of the decision made on the Donetsk regional referendum.
“The counter-terrorist operation will continue unhindered, despite the presence of terrorist and insurgent groups in the Donetsk region,” he said.

Itar Tass......

Kiev says ready for dialogue with Ukraine’s federalization supporters

 May 08, 12:23 UTC+4
An official from the Council for National Security and Defense stated that “everyone is tired of war: both law enforcers and civilians”
KIEV, May 8. /ITAR-TASS/. The Kiev authorities are ready to hold a peaceful dialogue with federalization supporters in Ukraine’s south-east in order to reconcile the conflict and avoid further victims. Deputy Secretary of Ukraine’s Council for National Security and Defense Viktoria Syumar made this statement on Thursday.

“Everyone is tired of war: both law enforcers and civilians. Therefore, where it is possible to solve the conflict through a dialogue, the Ukrainian authorities are ready to do this,” she is quoted as saying by Ukraine’s UNIAN news agency.

On Wednesday, the Donetsk Regional Council addressed the Kiev authorities urging to stop the military operation and to immediately withdraw units of Ukrainian army to bases. The statement issued by the council’s panel emphasizes that “the operation started upon the state authorities’ decision in the north of Donets region has already led to multiple victims among civilians”.

Russia supports direct dialogue between Kiev authorities and Ukraine's south-east

May 7, Russia’s President Vladimir Putin addressed Kiev officials urging them “to immediately stop all military and punitive operations in Ukraine’s South-East”, which, as he said, are “not a secure way to solve all domestic political disputes”, but, on the contrary, only contribute to the split.
“We are asking representative of the South-East of Ukraine, the supporters of federalization to postpone the referendum slated for May 11 in order to create proper conditions for this dialogue,” he said after talks with Swiss President and Chairperson-in-Office of the Organisation for Security and Cooperation in Europe (OSCE) Didier Burkhalter on Wednesday.
Putin added that Russia is interested in the speediest possible settlement in Ukraine that would take into account the interests of all citizens no matter where they live.
“Russia believes that the crisis that has broken out in Ukraine and is actively evolving by the worst possible scenario is to be blamed on those who organised the state coup in Kiev,” the president noted. He stressed that the masterminds and perpetrators of the coup had not bothered to disarm far-right and nationalist elements in the country.

OSCE's roadmap

The Organisation for Security and Cooperation in Europe (OSCE) will propose a roadmap on the resolution of the Ukrainian crisis in the nearest time, Swiss President and OSCE Chairperson-in-Office Didier Burkhalter said after talks with President Vladimir Putin.
Key provisions of the roadmap were discussed in Vienna on Tuesday, May 6, and can be stated as follows: ceasefire, de-escalation of tensions, dialogue, and elections.
The OSCE chief said his organisation was prepared to coordinate the implementation of the proposed plan. To this end, he will go to Brussels tonight and maintain close contact with the United Nations and the United States.

Unknown attackers destroy referendum ballots, printing equipment in Donetsk

 May 08, 14:15 UTC+4
Witnesses say unknown persons broke into printing houses and destroyed more than 1 million ballots for the upcoming referendum
© ITAR-TASS/Konstantin Sazonchik
KIEV, May 08. /ITAR-TASS/. Unknown persons overnight destroyed about a million ballots printed for a referendum on independence in the Donetsk Region, local police said on Thursday.
Witnesses said unknown persons broke into a printing house and destroyed 800,000 ballots prepared for a referendum planned for May 11. The attackers also destroyed printing equipment.
A similar incident occurred in another printing house in Donetsk, where unknown people stole about 300,000 ballots and damaged printing equipment.
The attacks were committed by radicals from the Right Sector extremist organization, witnesses said. The attackers were in modern army uniform with yellow and red-and-black bands with Right Sector marks.
There were several groups of attackers, whose aim was to prevent printing of ballots for the referendum, police noted.
The attackers escaped away in a white Volkswagen minibus and a silver-color Mazda minibus, both with Dnipropetrovsk region registration numbers.

Punitive operation to continue in east Ukraine regardless of referendum decision

 May 08, 13:06 UTC+4
KIEV, May 08. /ITAR-TASS/. A punitive operation in eastern Ukraine will continue regardless of decisions that federalization supporters will make, including on a referendum on May 11, secretary of the Ukrainian National Security and Defense Council Andriy Parubiy told a media briefing on Thursday.
“We will continue the operation. We are sure that it will be held successfully and will bring an expected effect,” he added.
On Wednesday, Russian President Vladimir Putin said Moscow was asking Ukrainian federalization supporters to postpone the referendum to a later date.

Ukraine's Poroshenko urges more sanctions if Russia backs referendum

BERLIN Wed May 7, 2014 2:39pm EDT


(Reuters) - Ukrainian presidential candidate Petro Poroshenko urged Europe and the United States to agree on a third wave of sanctions against Russia if the Kremlin supports a referendum planned by separatists in eastern Ukraine on May 11.
Separatists in the Donbass region say the Sunday referendum on secession will be similar to the one that preceded Russia's annexation of Crimea in March. Such a move could complicate Ukraine's May 25 presidential elections.
"If Russia will support this referendum we need absolutely agreed action about the third wave of sanctions, well-coordinated between the United States of America and the European Union," Poroshenko told reporters in Berlin shortly before meeting Chancellor Angela Merkel.
A poll last month put Poroshenko, who supported the pro-European uprising which ousted Kremlin-backed president Viktor Yanukovich, on 48.4 percent, just short of the absolute majority needed to avoid a runoff in a second round.
The confectionery tycoon said his priority was to stabilize the situation in Ukraine, where fears of war are mounting, and left open the possibility of a referendum later.
"We are ready to have even a referendum but not under (the threat of) machineguns or automatic rifles," he said, adding people were afraid to visit polling stations.
"After the presidential election, after restoring law and order, we are ready to discuss any referendum and we are not afraid of a referendum, including the constitutional changes which I ... am ready to discuss with anybody."
Poroshenko also said the Russians "want to invite some separatists to the table" of a second round of Geneva talks but that these people had little support and the only legitimate representative of Ukrainians should be the foreign minister.
He said his visit to Merkel was not about her supporting his campaign to become president, but rather about the chancellor of Germany backing Ukraine's attempts to defend its sovereignty.
German government spokesman Steffen Seibert said earlier this week a Sunday referendum would violate Ukraine's constitution and worsen an already deadly situation.
"The chancellor expressed to Mr. Poroshenko, as she does to all dialogue partners in connection with Ukraine, the importance of being willing to talk and capable of having a dialogue, especially in view of the election on May 25," Seibert said after Merkel's talks with Poroshenko.
"The OSCE should play a strong role in that."
The European Union and United States have warned Russia it will face additional sanctions against key sectors of its economy if Moscow disrupts Ukraine's plan to hold elections.
The West has already imposed several rounds of sanctions on specific Russians, including some members of Putin's inner circle, and several companies.

While Putin is finessing the East Ukraine situation ( attempting to head off additional sanctions while advocating steps that he is well aware neither the Federalists nor Kiev / West will accept ) , the real politik reasons for allowing the " will of the people " to play itself also follows Russian interests......

As Russian President Vladimir Putin positions his army along the border with Ukraine, his eyes are trained on more than former Soviet territory.
The parts of Ukraine where separatists and loyalists face off in ever-more violent clashes are home to the most valuable assets of the nation’s defense industry. More than 50 factories form an arms cluster that caters to Russia based on a trade accord from two decades ago, churning out air cargo transporters, helicopter engines and other hardware.
“Taking Ukraine’s eastern and southern regions would be hugely beneficial for Russia from a military and economic point of view,” said Mikhail Barabanov, the editor-in-chief of the Moscow Defense Brief magazine. “Russia will have control of the very important and valuable defense companies and plants.”

The Russian government’s $15 billion agreement with ousted Ukrainian President Viktor Yanukovych in December included a trade pact that set out to further intertwine the two countries’ defense industries. Putin has since warned that disruption to supplies would harm his military’s capability. Last week he said it would also be catastrophic for the Ukrainian arms industry.
More than half of Russia’s nuclear arsenal was built in Ukraine or is equipped with a Ukraine-made navigation system, according to analysts including Serhiy Zgurets, the chief editor of Defense Express, a Ukrainian military consultancy.

Strategic Backbone

The factories in the eight regions of Ukraine form the strategic backbone of an industry with $1.3 billion in annual exports. As well as Antonov air cargo transporters, Mi-8/17 and Mi-26 attack helicopter engines, they produce equipment for Albatros submarine chasers and service ballistic missiles.
“We hope the situation won’t develop into a complete interruption of cooperation,” Putin said on April 28 in Petrozavodsk, Russia. “In any case, we are working on all issues related to the replacement of imports.”
Ukraine, whose government in the capital Kiev is struggling with a burgeoning budget deficit and counting on the International Monetary Fund for a $17 billion bailout, needs the revenue from its defense industry more than ever.

State-run companies like attack helicopter engine maker Motor Sich, turbine producer Zorya Mashproekt, and ballistic-missile services company Yuzhmash are located in the most volatile areas of Ukraine.
From Kharkiv and Donetsk, the center of Ukraine’s industrial heartland, to the port city of Odessa, pro-Russian militants have battled Ukrainian forces. More than 70 have been killed since April 20. The government will hold its weekly meeting in Kharkiv today, while in Donetsk it said tax office employees were evacuated after people flocked to the building.

Expensive Invasion

Russia won’t seek to annex the region because of the risks of getting bogged down in a civil war, capital flight from Moscow and having to rescue the local economy, according to Barbara von Ow-Freytag, who advised the German government from 2008 to 2013 on Russian issues.
“Putin’s main goal right now isn’t an invasion of eastern Ukraine,” she said in a May 4 interview. “He’d do it if he could pull it off, but it would be far too expensive.”
The prospect of losing access to Ukrainian defense products may also be daunting.
While Russia may survive without Ukraine’s cheese, candy and railroad cars, goods it has banned over the years during trade disputes, arms are different. It would struggle without the 400 Ukraine-made engines it imports every year for its military helicopters or the $10 million it pays Ukraine to service its intercontinental ballistic missile system.

Weapons Systems

If supplies stop, there will be “a very serious problem with some weapon systems,” Siemon Wezeman, a senior researcher at the Stockholm International Peace Research Institute, or SIPRI, said yesterday. Production of new helicopters in Russia stalled until around 2020 as the country spends millions to retool domestic factories, Barabanov in Moscow said.
Ukraine was the world’s eighth-biggest supplier of arms in 2009-2013, according to SIPRI. Russia was the fourth-biggest buyer of Ukrainian defense-related products in 2009-2013 after China, Ethiopia and Pakistan, SIPRI said.
The ironclad Russian trade relationship forged in a 1993 treaty two years after the collapse of the Soviet Union would be hard to unravel, even as the crisis shreds political ties.
If the more than 20 contracts that make up the mass transfer of goods and expertise to Russia were canceled, Ukraine would stand to lose at least $600 million a year, while Russia’s defense budget might swell by more than $2 billion a year as it looks for replacements, according to Defense Express.

Looking Elsewhere

At DK UkrOboronProm, the state-run umbrella company that unites most of the defense industry, Chief Executive Officer Yuri Tereshchenko is drafting worst-case scenarios, studying alternate markets and whether some products can be adopted for domestic use to keep revenue flowing.
A moratorium on Russian sales “is a responsible decision in the current state of bilateral relations,” he said. “We realize that there are possible negative consequences for some companies because of a halt in cooperation with Russia.”
Ukraine is now looking to shift the direction of its defense exports further eastward, First Deputy Prime Minister Vitali Yarema said on April 30.
That would mean seeking new clients for Motor Sich, which has a contract to produce about 1,000 helicopter engines this year, 400 destined for Russia. Yuzhmash generates $10 million a year providing service and maintenance for Russia’s SS-19 missile system, according to Defense Express.

Nuclear Warheads

As much as 80 percent of Russia’s nuclear warheads are loaded in missiles designed or manufactured in Ukraine and originate from the former Soviet Union, according to Wojciech Luczak, the editor in chief of Polish magazine Raport.
Putin may yet find a peaceful end to the crisis and prevent disruption to supplies, said analysts Igor Sutyagin and Michael Clarke, who authored a report for the U.K.’s Royal United Services Institute for Defense and Security Studies.
An invasion “would be a very 19th century way of looking of looking at a 21st century relationship,” they wrote. “However, even that cannot be ruled out in the current circumstances.”