Putin talked tough but cooled tensions

Photo: The Canadian Press. All rights reserved.

Pro-Russian soldiers block the Ukrainian naval base in the village of Novoozerne, some 91 km west of Crimean capital Simferopol, Ukraine, on Monday, March 3, 2014. (AP Photo/Ivan Sekretarev)

Vladimir Putin talked tough but cooled tensions in the Ukraine crisis in his first comments since its president fled, saying Russia has no intention "to fight the Ukrainian people" but reserved the right to use force. As the Russian president held court Tuesday in his personal residence, U.S. Secretary of State John Kerry met with Kyiv's fledgling government and Moscow agreed to sit down with NATO.

Although nerves remained on edge in Crimea, with Russian troops firing warning shots to ward off Ukrainian soldiers, global markets catapulted higher on tentative signals that the Kremlin was not seeking to escalate the conflict. Kerry brought moral support and a $1 billion aid package to a Ukraine fighting to fend off bankruptcy.

Lounging in an arm-chair before Russian tricolour flags, Putin delivered a characteristic performance filled with earthy language, macho swagger and sarcastic jibes, accusing the West of promoting an "unconstitutional coup" in Ukraine. At one point he compared the U.S. role in Ukraine to an experiment with "lab rats."

But the overall message appeared to be one of de-escalation: "It seems to me (Ukraine) is gradually stabilizing," Putin said. "We have no enemies in Ukraine. Ukraine is a friendly state." He tempered those comments by warning that Russia was willing to use "all means at our disposal" to protect ethnic Russians in the country.

Significantly, Russia agreed to a NATO request to hold a special meeting to discuss Ukraine on Wednesday in Brussels, opening up a possible diplomatic channel in a conflict that still holds monumental hazards and uncertainties.

While the threat of military confrontation retreated somewhat Tuesday, both sides ramped up economic feuding in their struggle over Ukraine: Russia hit its nearly broke neighbour with a termination of discounts on natural gas, while the U.S. announced a $1 billion aid package in energy subsidies to Ukraine.

"We are going to do our best (to help you). We are going to try very hard," Kerry said upon arriving in Kyiv. "We hope Russia will respect the election that you are going to have."

Ukraine's finance minister, who has said Ukraine needs $35 billion to get through this year and next, was meeting Tuesday with officials from the International Monetary Fund.

World stock markets, which panicked the previous day, clawed back a large chunk of their losses Tuesday on signs that Russia was backpedaling. Gold, the Japanese yen and U.S. treasuries — all seen as safe havens — returned some of their gains. Russia's RTS index, which slumped 12 per cent on Monday rose 6.2 per cent Tuesday. In the U.S., the Dow Jones industrial average was up 1.4 per cent.

"Confidence in equity markets has been restored as the standoff between Ukraine and Russia is no longer on red alert," said David Madden, market analyst at IG.

Russia took over the strategic peninsula of Crimea on Saturday, placing its troops around the peninsula's ferry, military bases and border posts. Two Ukrainian warships remained anchored in the Crimean port of Sevastopol, blocked from leaving by Russian ships.

"Those unknown people without insignia who have seized administrative buildings and airports ... what we are seeing is a kind of velvet invasion," said Russian military analyst Alexander Golts.

The territory's enduring volatility was put in stark relief Tuesday morning: Russian troops, who had taken control of the Belbek air base, fired warning shots into the air as around 300 Ukrainian soldiers, who previously manned the airfield, demanded their jobs back.

About a dozen soldiers at the base warned the Ukrainians, who were marching unarmed, not to approach. They fired several warning shots into the air and said they would shoot the Ukrainians if they continued to march toward them.

The Ukrainian troops vowed to hold whatever ground they had left on the Belbek base.

"We are worried. But we will not give up our base," said Capt. Nikolai Syomko, an air force radio electrician holding an AK47 and patrolling the back of the compound. He said the soldiers felt they were being held hostage, caught between Russia and Ukraine. There were no other reports of significant armed confrontations Tuesday in Ukraine.

Amid the tensions, the Russian military on Tuesday successfully test-fired a Topol intercontinental ballistic missile. The missile launched from a launch pad in southern Russia hit a designated target on a range leased by Russia from Kazakhstan.

The new Ukrainian leadership in Kyiv, which Putin does not recognize, has accused Moscow of a military invasion in Crimea, which the Russian leader denies.

Ukraine's prime minister expressed hope Tuesday that a negotiated solution could be found. Arseniy Yatsenyuk told a news conference that both governments were talking again, albeit slowly.

"We hope that Russia will understand its responsibility in destabilizing the security situation in Europe, that Russia will realize that Ukraine is an independent state and that Russian troops will leave the territory of Ukraine," he said.

In his hour-long meeting with reporters Tuesday, Putin said Russia had no intention of annexing Crimea, while insisting its residents have the right to determine the region's status in a referendum later this month. Crimean tensions, Putin said, "have been settled."