In this image taken from video released by the Russia’s Federal Security Service taken from a Russian Coast Guard vessel purporting to show an incident between the Russian coast guard and a Ukrainian tugboat, in the Kerch Strait on Sunday. (Source: Sunday)

Ukraine Partially Imposes Martial Law After Russia Flare-Up

(Bloomberg) -- Ukraine imposed martial law in some regions a day after its navy was fired on by Russia in a major re-escalation of hostilities that drew condemnations of the Kremlin from the U.S. and the European Union.

President Petro Poroshenko said martial law was needed to ready Ukraine for potential further Russian aggression amid fears Sunday’s incident near Crimea would rekindle the simmering four-year-old conflict between the two former allies. On Tuesday, he said Ukraine’s “top priority” now is the return of 23 captured sailors and three ships.

While Ukraine’s Western partners blamed Russia, calls for harsher sanctions were only heard from smaller nations. Russia’s ruble partially rebounded Tuesday from a selloff in the previous session.

After nearly a day of silence, President Donald Trump said he wasn’t happy about the situation, adding that “hopefully it’ll get straightened out.” The sense that it’s largely Europe’s problem to solve reflects the view at the White House, according to one person close to the situation.

The renewed tensions stem from events in the waters near the Crimean peninsula that President Vladimir Putin annexed almost five years ago, reviving Cold War animosity. Six Ukrainian sailors were wounded as the ships were seized by Russia, which accused its neighbor of allowing boats to stray into its territory. Ukraine says the incident occurred in neutral waters.

Nikki Haley, the U.S. ambassador to the United Nations, blamed Russia’s “outlaw actions.” The U.S. will maintain its current Crimea-related sanctions, Haley said in a speech, stopping short of threatening additional restrictions. Secretary of State Michael Pompeo urged Poroshenko and Putin “to engage directly to resolve this situation” and said the U.S. continues to reject Russia’s annexation of Crimea.

Poroshenko said on Twitter that he spoke earlier with Pompeo.

German Chancellor Angel Merkel, who spoke with Putin about the crisis on Monday, offered to help Poroshenko de-escalate the situation, which comes days before a Group of 20 gathering in Buenos Aires. Reviving the patriotic fervor that accompanied Putin’s annexation of Crimea in 2014 could help him offset growing domestic discontent over the economy and changes to Russia’s pension system.

“This type of foreign-policy escalation is risky and won’t help relations with the West,” said Alexander Baunov of the Moscow Carnegie Center. “But if they swallow it, then it will look like another diplomatic victory.”

Ukraine Partially Imposes Martial Law After Russia Flare-Up

The martial-law measures for coastal regions and those bordering Russia will take effect Monday and run for 30 days, a scaled-down version of Poroshenko’s original plan to a two-month spell. He was forced to compromise after some opposition politicians said he was seeking to delay March’s presidential elections, which polls suggest he’ll lose.

“As soon as a Russian soldier crosses a border, I won’t waste a second to ensure the defense of Ukrainian territory,” Poroshenko told lawmakers.

With Ukraine’s finances under pressure from looming foreign-debt payments on stress on other emerging markets, there was concern that martial law could obstruct international aid payments. While yields on government debt sold last year jumped, the International Monetary Fund said it didn’t have restrictions on working with Ukraine.

©2018 Bloomberg L.P.