EU's Russia sanctions to stay until 'good' news on Ukraine

[BERLIN] The European Union said it won't lift sanctions on Russia until the situation in Ukraine improves, and further penalties are possible.

A cease-fire between government forces and pro-Russian separatists in eastern Ukraine is "not perfect, with some violations still," though "the trend is positive," the EU's foreign policy chief Federica Mogherini said.

Sanctions "will not be lifted until something really good happens on the ground and, on the other side, we're always ready to increase the pressure if needed," Ms Mogherini told European lawmakers in Riga, Latvia, on Friday.

The peace accord signed Feb. 12 in Minsk, Belarus, is taking hold, though the Organization for Security and Cooperation in Europe said on its website that the situation is "fluid and unpredictable" after 11 months of fighting that the United Nations says has killed more than 6,000 people. The US and the EU imposed sanctions a year ago after Russia annexed Ukraine's Crimea, and extended them in July after accusing the government in Moscow of sending troops and weapons to support the separatists. Russia denies the allegation.

More than 1,500 Ukrainian soldiers have died in the conflict, and more than 6,200 have been wounded, Yuriy Sergeyev, Ukrainian ambassador to the UN, said at a session of the Security Council on Friday.

Four Ukrainian troops were wounded in the past 24 hours as rebels continue firing on government forces with guns and mortars, military spokesman Andriy Lysenko told reporters in Kiev on Friday. Russian-backed rebels in Ukraine's Donetsk and Luhansk regions aren't complying fully with the requirement to withdraw heavy weapons and "no satisfactory cooperation is perceivable" with monitors from the OSCE, German government spokesman Steffen Seibert told reporters in Berlin on Friday.

Movement of OSCE observers "continues to be limited by all parties" and they can only verify the withdrawal of heavy weapons in "limited or individual cases," he said.

Rebels from the self-proclaimed Donetsk People's Republic said Ukraine's military was building up its forces near the Sea of Azov port city Mariupol. The separatists see the reinforcements as preparation for a new spring offensive, news service Interfax cited DPR defense ministry official Eduard Basurin as saying.

Russian Foreign Minister Sergei Lavrov and his German counterpart Frank-Walter Steinmeier noted progress on the pullback of weapons from the line of contact and called for the OSCE mission to be increased to 1,000 monitors, according to a statement from Mr Lavrov's ministry.

The EU must be ready with new sanctions to allow it "maximum speed in reacting to any provocation," UK Foreign Secretary Philip Hammond said after talks in Warsaw with his Polish counterpart Grzegorz Schetyna on Friday. While there's much discussion about barring Russia from the SWIFT international payments system, this would be "a very extreme sanction measure" that would "have a very significant impact" on the Russian and global economy, Hammond said.

Cutting Russia off from SWIFT would be "the nuclear option in terms of sanctions, we're all aware of that," Mr Schetyna said at a news conference with Hammond.

Russian President Vladimir Putin discussed implementation of the Minsk agreement at Russia's Security Council meeting on Friday, according to the Kremlin website. Putin has also replied to a letter from Ukrainian President Petro Poroshenko seeking the release of Nadiya Savchenko, a captured military pilot held in a Moscow jail, Rossiya 24 television reported, citing Kremlin spokesman Dmitry Peskov.

The hryvnia, the world's worst-performing currency against the dollar in the past 12 months with a 60 per cent plunge, has rallied 48 per cent against the dollar since reaching a record low of 33.75 on Feb 26. It weakened 1.2 per cent to 22.73 at 2.08 pm in Kiev on Friday, data compiled by Bloomberg showed, while the government's benchmark bond due July 2017 was little changed at 45.4 cents to the dollar.

BLOOMBERG