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Sunday August 2nd, 2015 10:40PM

Crimea goes east, Ukraine goes west in 2 new deals

By The Associated Press
BRUSSELS (AP) -- Two signatures Friday on opposite sides of Europe deepened the divide between East and West, as the European Union pulled Ukraine closer into its orbit and Russia formally annexed Crimea.

In this "new post-Cold War order," as the Ukrainian prime minister called it, besieged Ukrainian troops on the Crimean Peninsula grappled with an existential choice: leave, join the Russian military or demobilize. Ukraine was working on evacuating its outnumbered troops in Crimea, but some said they were still awaiting orders.

The chief of the U.N. came to Kiev and urged all sides to keep their tempers down.

Many eyes were on Russian President Vladimir Putin's next move, as they have been ever since pro-Western protests drove out Ukraine's president a month ago, angering Russia and plunging Europe into its worst crisis in a generation.

Putin sounded a conciliatory note Friday, almost joking about U.S. and EU sanctions squeezing his inner circle and saying he saw no reason to retaliate - but his government maintained warnings of further action.

Russia's troubled economic outlook may drive its decisions as much as any outside military threat. Stocks sank further Friday and a possible new downgrade loomed. Visa and MasterCard stopped serving two Russian banks and Russia conceded it may scrap plans to tap international markets for money this year.

Despite those clouds, Putin framed Friday's events in victorious colors, ordering fireworks in Moscow and Crimea reminiscent of the fireworks displays when Soviet troops drove the Nazis from occupied cities in World War II.

At the Kremlin, Putin hailed the incorporation of the Black Sea peninsula of Crimea into Russia as a "remarkable event," then finalized it by signing parliament bills into law.

At nearly the same time in a ceremony in Brussels, EU leaders sought to pull the rest of cash-strapped Ukraine westward by signing a political association agreement with the new Ukrainian prime minister.

This is a highly symbolic piece of paper - part of the very same EU deal that touched off Ukraine's political crisis when President Viktor Yanukovych rejected it in November, choosing a bailout from Russia instead. That ignited months of protests that eventually drove him from power.

Ukrainian Prime Minister Arseniy Yatsenyuk, a leader of the protest movement, eagerly pushed for the EU agreement.

"This deal meets the aspirations of millions of Ukrainians that want to be a part of the European Union," Yatsenyuk said in Brussels.

The agreement includes security and defense cooperation, he said, though it is far from full EU membership and doesn't include an important free-trade element yet.

But the EU decided to grant Ukraine financial advantages such as reduced tariffs to boost its ailing economy until the full deal can be signed. Those trade advantages are a blow to Russia, which had hoped to pull Ukraine into a Moscow-focused customs union instead.

In exchange for the EU pact, Ukraine's government promises economic reforms.

"In the long term, the biggest challenge will be to build a strong Ukrainian economy, rooted in strong institutions that respect the rule of law," British Prime Minister David Cameron said at the EU summit.

Russia's foreign minister dismissed the EU pact, saying the current Ukrainian leadership lacks popular support and should have held elections before making such a decision.

U.N. Secretary-General Ban Ki-moon, visiting Ukraine's capital, urged talks between Kiev and Moscow.

"At times like this, it is vital that all parties refrain from any provocative actions that could exacerbate an already very tense and very volatile situation," he said.

The EU hit 12 more people with sanctions Friday for Russia's annexation of Crimea, bringing its list of those facing visa bans and asset freezes to 33. They include one of Russia's deputy prime ministers, a Putin adviser and the speaker of Russia's upper house of parliament, according to a document obtained by The Associated Press.

Still, the EU names fell short of the high-powered U.S. list, in an apparent reflection of European wariness of going as far as Washington to punish Russia - Europe's neighbor, energy supplier and trade partner.

President Barack Obama on Thursday ordered a second round of sanctions against 20 members of Putin's inner circle and a major bank supporting them.

Moscow retaliated by banning nine U.S. officials and lawmakers from entering Russia.

The latest U.S. sanctions, which targeted Putin's chief of staff along with other senior Kremlin aides and four businessmen considered to be his lifelong friends, dealt a painful blow to Russia. Obama also warned that more sweeping penalties against Russia's economy could follow.

Annexing Crimea "is a flagrant breach of international law and something we will not recognize. This behavior belongs to the Europe of the last century not this one," Cameron said.

EU leaders decided to prepare economic sanctions in case the situation in eastern Ukraine deteriorates further, and decided to speed up agreements with former Soviet republics Georgia and Moldova.

Putin tried to play down the sanctions' toll on Russia at Friday's televised session of the presidential Security Council.

"We should keep our distance from those people who compromise us," he said, a jocular reference to the officials on the sanctions list, some of whom attended the meeting.

Putin added sardonically that he would open an account to keep his salary in the targeted Bank Rossiya, a private bank that is owned by Yuri Kovalchuk, considered to be Putin's longtime friend and banker. With about $10 billion in assets, Rossiya ranks as the 17th-largest bank in Russia and maintains numerous ties to banks in the United States, Europe and elsewhere.

At the same time, Putin said he sees no immediate need for further Russian retaliation to the U.S. sanctions, adding that Russia will keep funding a program jointly with NATO to service Afghan helicopters and train their crews.

However, just a few hours later, the Russian Foreign Ministry said Moscow will "harshly" respond to the latest round of U.S. sanctions and Putin's spokesman, Dmitry Peskov, said that Russia would retaliate.

The contradictory messages were highly unusual, and seemed to convey a Kremlin warning to the West to back off.

Russia has brought tens of thousands of troops to the regions along Ukraine's borders, nominally for exercises.

The Ukrainian side of the border is being guarded sternly, and guards have been turning away 400 to 500 Russians daily and arresting those "not with very good intentions," the head of the border guards service, Mykola Lytvyn, told reporters Friday.

Russia rushed the annexation of Crimea after residents there voted in a hastily called referendum Sunday to leave Ukraine and join Russia. Ukraine and the West have rejected the vote, saying it was held at gunpoint since Russian troops had seized control of Crimea two weeks earlier.

Russian Defense Minister Sergei Shoigu told Putin on Friday that 72 Ukrainian military units in Crimea have decided to join the Russian military. His claim couldn't be independently confirmed.

At the Ukrainian military air base in Belbek, outside the Crimean port of Sevastopol, Col. Yuly Mamchur told reporters Friday he was still waiting for orders from his commanders on whether to vacate.

Amid its political crisis, Ukraine is teetering on the verge of bankruptcy, struggling to pay off billions of dollars in debts in the coming months. The U.S. and the European Union have pledged to quickly offer a bailout.
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