Ukraine deal prevents further sanctions, for now

The U.S. and its European allies demanded Russia help calm the Ukraine crisis or face new sanctions after four-nation talks produced an accord aimed at lowering tensions in their worst standoff since the Cold War.

Top diplomats from Ukraine, the U.S., the European Union, and Russia called for illegal groups in Ukraine to disarm, return seized buildings to their owners and free occupied public places. In line with the pact, the government in Kiev prepared an amnesty law for pro-Russian protesters while also voicing skepticism that the agreement will solve the crisis.

“Ukraine does not have any extraordinary expectations,” Ukrainian Prime Minister Arseniy Yatsenyuk said in Kiev today.

U.S. and EU officials expressed readiness to deepen sanctions against Russia, which they say has massed 40,000 troops on Ukraine’s border and is fomenting unrest after its annexation of Crimea last month. President Vladimir Putin has said his government isn’t responsible for home-grown dissatisfaction among Russian-speaking residents of eastern Ukraine while maintaining he has the right to send in troops.

Enforcing Agreement

Along with a call for amnesty for pro-Russian activists, the officials agreed that a mission from the Organization for Security and Cooperation in Europe will help oversee events in eastern Ukraine and a new constitutional process will aim to establish “a broad national dialogue” in the former Soviet republic of 45 million people.

The deal may calm the situation even as risks -- including the difficulty of disarming both pro-Russian activists in eastern Ukraine and nationalist paramilitary organizations in the country’s west -- are “likely to scupper the agreement,” analysts from New York-based Eurasia Group including Alex Brideau and Mujtaba Rahman wrote in a note today.

“Any fresh U.S. sanctions are now unlikely at least until next week, and the possibility of expanded EU sanctions is now more remote,” they wrote, adding that Putin questioned the inclusion of Russian-speaking regions in Ukraine in televised speech that coincided with yesterday’s talks.

“His recent surge in domestic popularity

depends on his ability to make good on an expansive and pugnacious conception of Russia’s national interests in Ukraine,” they wrote.

Defending Rights

Putin yesterday rejected as “nonsense” accusations from the U.S. and Ukraine that he’d already deployed forces in the east of the country and said that Russia had taken over Ukraine’s Black Sea peninsula of Crimea last month because Russian speakers there were facing “real threats.”

“We definitely know that we should do everything to help these people defend their rights and define their destiny,” Putin said in a televised question-and-answer session in Moscow. “We will fight for this. The Federation Council gave the president the right to use military force in Ukraine. I hope very much that I don’t have to use this right.”

Russia’s Micex index of equities advanced for a third day, while the ruble jumped the most among 31 global currencies tracked by Bloomberg and Ukraine’s hryvnia posted the longest rally since August. U.S. stocks rose and Treasuries fell, pushing 10-year note yields up the most in a month.

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