West Warns Russia Not to Annex Crimea After Referendum

The U.S. and the European Union warned Russia not to annex Crimea after a referendum in Ukraine’s southern region, setting the stage for sanctions on Russia in the worst diplomatic standoff since the Cold War.

A total of 95.5 percent of voters in Black Sea peninsula backed leaving Ukraine to join Russia in the referendum, preliminary results show. The Ukrainian government, the EU and the U.S. consider the vote illegal, while Russia said it “fully met international norms.” Turnout was 82.7 percent, according the election commission.

As the West threatens to ratchet up sanctions if Russia doesn’t back down from taking over Crimea, the Kremlin has deployed about 60,000 troops along the Ukrainian border, the government in Kiev said. Ukraine closed border crossings to Russia and will mobilize as many as 15,000 volunteers in the next 15 days to defend the nation, officials said today.

sovietflag_small West Warns Russia Not to Annex Crimea After Referendum

The international community “will not recognize the results of a poll administered under threats of violence and intimidation from a Russian military intervention,” the White House said in a statement. “Russia’s actions are dangerous and destabilizing. Military intervention and violation of international law will bring increasing costs for Russia.”

Khruschev’s Gift

A majority of Crimea’s residents are ethnic Russians and the region was part of Russia until 1954, when it was given by Soviet leader Nikita Khrushchev to Ukraine. President Vladimir Putin contends ethnic Russians in Crimea are at risk after the ouster last month of President Viktor Yanukovych, an assertion that Ukraine’s new leaders deny.

U.S. President Barack Obama has signed an executive order authorizing financial sanctions, allowing Treasury Secretary Jacob J. Lew to take steps that could include freezing assets or blocking American companies or individuals from doing business with Russians, Ukrainians or others deemed a threat to Ukraine’s security.

Putin spoke with Obama today and said even amid differing views it’s necessary to work together to stabilize Ukraine, the Kremlin said on its website. Putin also telephoned with German Chancellor Angela Merkel.

U.K. Foreign Secretary William Hague called the Crimea vote “illegal, unconstitutional and illegitimate.” In an e-mailed statement, Hague said the EU would need to make “a firm and united response” to Russia.

EU Sanctions

EU foreign ministers, who meet tomorrow, are poised to impose asset freezes and visa bans on people and “entities” involved in Russia’s seizure of Crimea, an EU official said. Leaders of the 28-nation EU meet in Brussels on March 20-21 to discuss further measures aimed at Russia.

“We are all reluctant to impose sanctions because Russia will probably respond and we’ll all suffer as a result,” Foreign Minister Radoslaw Sikorski of Poland, a NATO and EU country that shares a border with Russia’s Kaliningrad exclave, said on CNN. “But Russia is leaving us with no choice.”

U.S. Vice President Joe Biden travels to Poland and Lithuania tomorrow for talks on Ukraine, according to a White House statement. The Pentagon said last week it would send 12 F-16 aircraft to Poland as a sign of U.S. commitment to defend allies in the region; the U.S. previously sent six fighter jets to Lithuania.

Yen Gains

The yen rose in early Asian trading, extending last week’s steepest gain versus the dollar since January, as the Crimea vote added to demand for haven assets. Japan’s currency gained 0.1 percent to 101.27 per dollar, after climbing 1.9 percent last week in the steepest advance since the five days ended Jan. 24.

The euro slid 0.1 percent to $1.3901 after touching $1.3967 on March 13, the highest level since October 2011. The Australian dollar fell 0.3 percent to 90.05 U.S. cents.

Russian stocks posted the biggest weekly drop since May 2012, with the Micex Index (INDEXCF) sliding 7.6 percent to 1,237.43 on March 14, the lowest level since May 2012.

Lilit Gevorgyan, senior economist at IHS Global Insight (INSDHYS) in London, said that “currency and equity markets have already been punishing the Russian ruble and companies and the talk of EU sanctions is only fueling capital flight.”

Reports of Russia’s increasing military presence follow accusations by Ukraine yesterday that its neighbor’s troops entered the Kherson region on the Azov Sea from the Crimea peninsula they already occupy.

‘Cold War’

“We’re on the brink of a new Cold War, where Europe’s view of Russia as a benign nation that could be integrated economically and politically has become history,” Fredrik Erixon, director of the European Centre for International Political Economy in Brussels, said by phone.

Crimean Premier Sergei Aksenov has told reporters that the peninsula may become part of Russia next week, though full integration may take a year. Crimea will switch to the Russian ruble from Ukraine’s hryvnia April 1, RIA Novosti cited Crimean Deputy Prime Minister Rustam Temirgaliev as saying today.

The latest reports of Russian military activity beyond Crimea’s borders in eastern Ukraine have heightened concerns that Putin plans to extend his reach in Ukraine.

“We can rule out that Putin will limit himself to Crimea,” Joerg Forbrig, a senior program officer at the Berlin bureau of the German Marshall Fund of the U.S., said in a phone interview. “There is no prospect of self-restraint on the part of Putin’s Kremlin.”

UN Resolution

Russia yesterday vetoed in the United Nations Security Council a resolution proposed by the U.S. that declared the referendum illegal and stressed the need for political dialogue to resolve the crisis. In New York, 13 members of the Security Council backed the resolution and China abstained.

Russian lawmakers are scheduled to consider legislation March 21 that would allow Russia to incorporate parts of countries where the central authority isn’t functioning and local residents want to secede, Sergei Markov, a Kremlin adviser and vice rector of the Plekhanov Russian University of Economics in Moscow, said in a telephone interview from Sevastopol yesterday.

“Preparations are already under way to incorporate Crimea into Russia,” he said.