Russian President Vladimir Putin urged Ukraine to withdraw forces from its easternmost regions as the International Monetary Fund warned that extra financing may be needed if control of the industrial heartland is lost.

In a telephone call yesterday with German Chancellor Angela Merkel, Putin also demanded an end to violence gripping cities in southeastern Ukraine, according to a Kremlin statement. The Ukrainian conflict will top the agenda when Merkel and U.S. PresidentBarack Obama meet today in Washington, according to White House spokesman Jay Carney.

“We expect to continue a path that sees an international coalition escalating the costs that Russia will have to endure” if it “continues to destabilize the situation in eastern Ukraine and southern Ukraine, or even goes further and uses its forces to cross the border,” Carney told reporters yesterday.

Ukraine no longer controls the eastern city of Donetsk, Acting President Oleksandr Turchynov said on April 30. The U.S. and European Union accuse Russia of stoking the turmoil, which has worsened even after they ratcheted up sanctions on Russian interests. Russia says Ukraine’s rulers must listen to complaints in the east and cede powers to the regions.

David Fuller's view

Putin’s chutzpah is encouraged by those slap on the wrist sanctions imposed by Europe and the USA.  They are a small price to pay if he can effectively gain control of Eastern Ukraine.  If the USA and EU wish to have any chance of preventing this, they will need to at least introduce sanctions against Russia’s oil and banking industries.  The tradeoff is that this would considerably increase East/West tensions, worry the markets and trigger counter sanctions from Russia.