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EU Spars Over Russia Sanctions as Crimea Readies Secession Vote

March 6 (Bloomberg) -- European Union leaders quarreled over how to tame Russia after its military moves in Ukraine, reawakening divisions that have plagued the bloc since it absorbed former Soviet satellite countries a decade ago.

A summit in Brussels today started with eastern European countries calling for a tough line on the Kremlin and western countries offering Russia more time to pull back its forces in Crimea before imposing sanctions.

The messages are “not unison,” Lithuanian President Dalia Grybauskaite told reporters before the summit. “Russia is trying to threaten all Europe, becoming unpredictable, and they are trying to rewrite the borders after the Second World War in Europe.”

The standoff plunged the EU back into the realtime crisis management that dominated the euro-area debt crisis, with the summit outcome hinging on separate diplomatic talks in Rome and events on the ground in Ukraine. The parliament in Crimea, the southern Ukraine region seized by pro-Russian forces, voted today to hold a referendum March 16 on becoming part of Russia.

Today’s emergency summit in Brussels had loomed as a deadline for President Vladimir Putin to withdraw forces to bases which Russia leases in Crimea, where the Black Sea fleet is headquartered. On March 3, EU foreign ministers demanded that Russia “immediately” take “de-escalating steps” or face consequences.

More Time

Three days later, some leaders said Russia deserves more time. Dutch Prime Minister Mark Rutte said the EU needs to “give the route of de-escalation a chance,” Austrian Chancellor Werner Faymann sought “a de-escalation and the inclusion of Russia in a solution,” and Luxembourg Prime Minister Xavier Bettel looked to a possible decision on sanctions at the next scheduled summit in two weeks.

That contrasted with the message from the Baltic countries and countries such as Poland that events in Ukraine should not be seen in isolation. Moldovan Prime Minister Iurie Leanca, whose country shares a border with Ukraine and is not an EU member, said in an interview in New York yesterday that he was concerned the Crimea situation was “very contagious.”

United Nations envoy Robert Serry “cut short” a fact- finding mission to the Ukrainian peninsula yesterday after unidentified armed men ordered him to leave Crimea immediately. About 10 to 15 men, some of them lightly armed and wearing military fatigues, stopped Serry as he was leaving naval headquarters in Crimea, UN Deputy Secretary-General Jan Eliasson told reporters on a call from Kiev.

Yields Rise

Ukraine’s international bonds due in June declined 0.7 percent to 93.08 cents on the dollar as of 1:54 p.m. in Kiev, lifting the yield by 3.37 percentage points to 39.86 percent. The yield jumped 8 percentage points yesterday after the Finance Ministry signaled it may consider debt restructuring.

In Brussels, Europe’s fiscal crisis also cast an economic shadow over the meeting, lessening the will to curb commercial ties with Russia. Germany, Europe’s largest economy, relies on Russia for 35 percent of its gas and oil imports.

German Chancellor Angela Merkel, who was at the center of the debt-crisis diplomacy, said the outcome of today’s deliberations may depend on whether a breakthrough comes at a meeting in Rome to be attended by U.S. Secretary of State John Kerry and Russian Foreign Minister Sergei Lavrov, as well as the foreign ministers of Germany, France, the U.K. and Italy.

Lavrov told reporters in Madrid yesterday that any resolution must be based on last month’s accord negotiated by the Polish, Germany and French foreign ministers and signed by ousted Ukrainian President Viktor Yanukovych and the opposition.

Merkel, Yatsenyuk

Television pictures showed Merkel in conversation with Ukraine’s Prime Minister Arseniy Yatsenyuk, who is also attending the meeting, introducing him to EU President Herman van Rompuy. The summit is slated to end in mid-afternoon.

European consensus was closer on a proposal to add 1 billion euros ($1.4 billion) to the 610 million euros in emergency aid that the EU plans to disburse once Ukraine strikes a standby agreement with the International Monetary Fund.

Those cash injections to avert a Ukrainian default would form the nucleus of a package of grants and project loans that could top 11 billion euros over seven years, the European Commission said in making the proposal yesterday.

Merkel, speaking to reporters, put help for Ukraine as the first item on her list of three points to be discussed. “We will also look at sanctions,” she said. “Whether they have to be put into effect or not -- we will decide that based in part on how the diplomatic process advances.”

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