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Russia Handed Crimea Deadline as Yanukovych Warns of Civil War

March 11 (Bloomberg) -- The European Union told Russia it must switch course in Crimea by next week or risk more sanctions as Ukraine’s deposed president warned of a possible civil war.

EU leaders will discuss harsher penalties on March 17 barring “obvious changes in Russia’s actions,” German Foreign Minister Frank-Walter Steinmeier said today in Estonia. Toppled President Viktor Yanukovych told reporters in Russia that lawlessness is spreading in Ukraine, fomented by the “fascists and ultranationalists” who are in charge in Kiev.

“We don’t want a confrontation, but the actions of the Russian side make the preparations necessary,” Steinmeier said in Tallinn. “We continue to urge Russia to use the last possibilities that are still there for a diplomatic solution against such an escalation. Otherwise, relations between Europe and Russia won’t improve.”

Russia is wresting control of Ukraine’s Crimean peninsula, home to its Black Sea Fleet, sparking the worst crisis between Russia and the West since the Cold War. Moscow-backed Yanukovych, who was ousted last month after three months of anti-government protests, claims to still be Ukraine’s leader. The EU and the U.S. recognize the new administration in Kiev.

National Guard

Ukraine, which says almost 19,000 Russian troops have taken control of Crimea, began military drills yesterday to test combat readiness. It may create a 20,000-strong National Guard to secure borders and provide a non-military “answer to destabilization,” Interior Minister Arsen Avakov said today.

President Vladimir Putin claims the ethnic Russians who dominate Crimea are at risk from the new government in Kiev, an allegation Ukraine denies. He backs the Black Sea region’s recently appointed administration, which plans to hold a March 16 referendum on joining Russia. Western nations decry the vote.

Russian Foreign Minister Sergei Lavrov yesterday faulted a U.S. plan for easing the crisis that he said would have required recognizing the ouster of Yanukovych.

Western governments including the U.S. and U.K. are urging Russia to pull back troops and hold direct talks with Ukraine. Britain is hosting a meeting today to compile a list of people who could be hit by sanctions if Russia doesn’t co-operate, including asset freezes and travel bans.

The yield on Ukrainian government Eurobonds due 2023 fell 2 basis points to 10.35 percent today, snapping four days of increases. The hryvnia was little changed at 9.23 per dollar. The currency has slumped 10.7 percent this year.

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