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Kerry Demands Russian Retreat as Medvedev Arrives in Crimea

March 31 (Bloomberg) -- U.S. Secretary of State John Kerry demanded Russia pull its forces back from Ukraine’s border as Russian Premier Dmitry Medvedev arrived in Crimea in the first visit by a top government official since his country annexed the Black Sea peninsula.

At a meeting with Kerry yesterday, Russian Foreign Minister Sergei Lavrov said Ukraine should devolve power to give its regions more autonomy and ensure minority rights. Kerry expressed U.S. concerns that what it estimates to be 40,000 troops massing on Ukraine’s eastern border may signal Russia is ready to invade its neighbor.

“Any real progress in Ukraine must include a pullback of the very large Russian force that is currently massing along Ukraine’s borders,” Kerry said at a news conference that ended early today after meeting Lavrov in Paris. “We believe that these forces are creating a climate of fear and intimidation in Ukraine.”

Shrugging off sanctions from the U.S. and its European allies, President Vladimir Putin has justified Russia’s takeover of Crimea as righting a historical wrong that split the region off from Russia when the Soviet Union collapsed. In the worst confrontation between former Cold War enemies since the fall of the Iron Curtain, he has criticized the EU and NATO military alliance for expanding into former Soviet territory.

‘Diplomatic Solution’

Europe’s worst political standoff in more than two decades has rattled markets, even as a lull in the confrontation and an emerging-market stock rally amid confidence in the global economy has lifted the Micex stock index in Moscow.

The Micex rose 0.5 percent by 3:38 p.m. to 1,351.05, easing its loss this year to 10 percent, according to data compiled by Bloomberg. Russia’s ruble was 0.4 percent higher against a basket of currencies the central bank uses to manage the unit. In Ukraine, the yield on the government’s debt due April 2023 fell 11 basis points to 8.68 percent by 1:45 p.m. in Kiev and was down 82 basis points this month.

President Barack Obama’s administration has called for more international monitors in Ukraine, starting a direct dialogue between Russia and the new government in Kiev, and advancing the process of constitutional reforms and May 25 national elections, a State Department official said.

After a four-hour meeting in Paris, Kerry and Lavrov said at separate briefings the sides would hold further talks to seek an outcome acceptable to Ukraine.

Russia’s Push

Medvedev arrived in Simferopol, Crimea’s capital, for meetings on regional economic development. Russia will create a special economic zone there, he said at a media briefing. He pledged to raise state salaries to the Russian average by July.

Lavrov said that while he and Kerry expressed differing views on the reasons behind the crisis, they were in agreement on “the need to seek common ground on the diplomatic path for an exit from this situation that will meet the interests of the Ukrainian people,” Russia’s Foreign Ministry cited him as saying in a statement today on its website.

Russia wants Ukraine to grant greater powers to its regions, have a non-aligned status outside the North Atlantic Treaty Organization and make Russian a second official language. Kerry said the international community stands with Ukraine and won’t allow for decisions to be made without it.

“This principle is clear: No decisions about Ukraine without Ukraine,” Kerry said.

Illegal, Illegitimate

Russia should deal with issues inside its own borders, including giving its regions and minorities more autonomy and introducing minority languages like Ukrainian, before forcing them on its neighbor, Ukraine’s Foreign Ministry said in a statement yesterday.

“Russia’s leaders should deal with the problems of the Russian Federation, not Ukraine’s problems,” acting President Oleksandr Turchynov said in a statement on his website today.

The U.S. and European Union have vowed to intensify sanctions on Russia’s military, energy and financial industries if the country pushes further into Ukraine. Kerry said the U.S. considers Russia’s actions to be “illegal and illegitimate,” and said it was “on the wrong side of history.”

German Chancellor Angela Merkel said further violations of international law would trigger more sanctions and condemned Russia’s “either-or” mentality. The crisis is a setback, even as sanctions have given Russia reason for pause, she said.

“I have the impression that a process of reflection has begun,” in Russia, she told students at a Berlin school today.

‘Invasion Force’

In a call with Obama last week, Putin highlighted a “rampage of extremists” intimidating officials and residents “in various regions,” according to a statement from his office at the Kremlin.

Backed by state-run media in Russia, Putin’s government has accused neo-Nazi and Russophobe groups of taking over the Kiev- based government and insists it has the right to defend Russian speakers from attacks. Ukraine says there are no such attacks and accuses Russia of fomenting unrest by sending pro-Russian agents to provoke clashes in its eastern regions.

Senator Dianne Feinstein, chairman of the U.S. Senate Intelligence Committee, said, “there is no question that there are 40,000-plus troops, that they are staged in various areas” near Ukraine’s border.

“To people who watch this, it looks like an invasion force,” Feinstein, a California Democrat, said yesterday on CNN’s “State of the Union” program.

Defense Secretary Chuck Hagel also cut short the Washington visit of General Phil Breedlove, commander of the U.S. European Command, sending the four-star general back to Europe days before testifying to Congress. Breedlove will meet NATO foreign ministers at a conference in Brussels April 1-2.

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