Ukraine, Russia raise stakes ahead of peace talks

Dmitry Zaks
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Ukrainian soldiers guard a checkpoint in the southern city of Odessa, on January 5, 2015

Ukrainian soldiers guard a checkpoint in the southern city of Odessa, on January 5, 2015 (AFP Photo/Alexey Kravtsov)

Kiev (AFP) - Ukraine fended off renewed financial pressure from Russia on Saturday by accusing Moscow of orchestrating rebel attacks that killed two soldiers and heightened tensions ahead of mooted international peace talks.

The stakes between Moscow and Kiev have been rising since Ukrainian President Petro Poroshenko surprised many at the end of December by announcing plans to meet Russia's Vladimir Putin at a mini-summit in the Kazakh capital Astana on Thursday.

The two leaders have rarely spoken since agreeing to a September 5 truce that was meant to calm a pro-Russian mutiny in eastern Ukraine in which more than 4,700 people have now lost their lives.

That deal was followed by 1,300 more deaths and renewed independence claims by Ukraine's two separatist provinces.

Yet both German Chancellor Angela Merkel and French President Francois Hollande -- the main mediators in one of Europe's worst wars in decades -- still view the tattered pact as pact as the only viable way out of the crisis.

The two will dispatch their foreign ministers to Berlin for a Monday meeting with their Russian and Ukrainian counterparts aimed at drafting a reinforced commitment to the truce the four countries' leaders could sign in Kazakhstan.

Poroshenko's push for peace was quickly followed by an uptick in rebel attacks that had subsided with the onset of freezing and snowy weather across the devastated rustbelt of the ex-Soviet republic last month.

But Ukraine on Saturday reported the deaths of two more soldiers in a day of rocket strikes that also injured 20 troops. At least eight civilians and six servicemen -- as well as an undisclosed number of militants -- have been killed since Thursday night.

Poroshenko blamed the fresh bloodshed on Russia's decision to continue covertly supplying the rebels with powerful weapons and tanks.

"The Ukrainian-Russian border remains open to incoming military equipment and the ceasefire is being constantly violated by the gunmen," Poroshenko told visiting Latvian Foreign Minister Edgars Rinkevics.

Moscow has brushed off NATO satellite imagery purporting to show its units and heavy equipment moving into the war zone as forgeries.

But it has openly tightened the financial screws on its neighbour throughout the conflict -- a policy that now threatens to force Kiev to default on its debt.

Poroshenko on Saturday named "financial assistance" the top priority of his future discussions with the European Union.

- $3 billion debt -

The most immediate danger facing Kiev is the prospect of Moscow demanding the early payment of $3 billion (2.5 billion euros) it had lent former president Viktor Yanukovych in December 2013 to convince him to ditch an EU alliance and side with the Kremlin instead.

Yanukovych's regime was toppled by pro-European protesters two months later and Moscow soon reminded the new Ukranian leaders that the loan carried very strict terms.

One of those gave Russia the right to demand full and immediate repayment should Ukraine's debt to GDP ratio rise above 60 percent -- a condition that rating agency Moody's said Kiev had broken at the end of last year.

"Ukraine has violated the conditions of this loan -- specifically that Ukraine's public debt does not surpass 60 percent of its GDP," Russian Finance Minister Anton Siluanov said Saturday.

"Russia has all the grounds for demanding an early repayment of this loan," he added.

The eurobond matures this December and Siluanov appeared ready to leave open the possibility of Moscow demanding the money back at any moment.

"The decision has not been taken yet," he said.

The minister's comments themselves came in response to earlier remarks by an unnamed official calling the prospects of Moscow asking for immediate payment "highly likely".

The unattributed warning was flashed simultaneously by Russia's three main agencies -- a type of leak Moscow often employs to indicate what could happen should its views not be taken into account.

Senior Ukrainian officials did not immediately respond to Siluanov's comments.