Russia defied pleas from the West to loosen its grip on Ukraine’s southern Crimea region, as the European Union promised 1.6 billion euros ($2.2 billion) in emergency aid to help the Ukrainian government avert a default.

Russian Foreign Minister Sergei Lavrov said the western-backed government in Kiev no longer rules over Crimea, saying control has shifted to armed “self-defense” groups. U.S. Secretary of State John Kerry warned Russia against violating “very clear legal obligations” to uphold Ukraine’s unity.

The clashing rhetoric was the prelude to a duel later today in Paris when Lavrov and Kerry meet for the first time since pro-Russian forces seized control of Crimea. Lavrov, who traveled to Paris from Madrid, didn’t attend a meeting this morning with his U.S., U.K. and Ukrainian counterparts.

A total of 35 unarmed military personnel from 18 countries were dispatched as observers to Ukraine by the Organization for Security and Cooperation in Europe, a 57-nation forum that includes Russia and the U.S. Russia isn’t taking part in the mission. The Ukrainian border service set up checkpoints along roads into the Crimean peninsula and reinforced checks along the border with Russia, citing six instances of Russian troops attacking border guards.

Hryvnia Drop

Amid tensions on the ground, the Ukrainian hryvnia depreciated 3.4 percent to 9.415 per dollar from yesterday’s one-week high, data compiled by Bloomberg show. The UX Index of equities in Kiev fell 1.1 percent after jumping 9.5 percent yesterday.

In Paris, foreign ministers gathering for an international conference on help for Lebanon were focused on Ukraine in the aftermath of the toppling of its Kremlin-backed president and Russia’s move to secure its Black Sea fleet.

Russia failed to send a participant to a morning meeting called to discuss the “Budapest Memorandum,” according to a joint statement in which the U.S., the U.K. and Ukraine said they “deeply regret” the no-show. Signed in 1994 by the U.S., the U.K. and Russia, the accord commits all parties “to refrain from the threat or use of force against Ukraine’s territorial integrity,” according to the statement.

It remained unclear to western participants whether Lavrov, who was would attend an afternoon session on Ukraine.

‘Diplomatic Process’

“What we’re really trying to do here today is to bring the Russians into the diplomatic process,” U.K. Foreign Secretary William Hague told reporters. “Unless you’re prepared to sit down with the Ukrainians, how do you find the de-escalation. You need to be talking to each other.”

Western officials are working to flesh out a combination of sanctions against Russia and financial incentives to enable Ukraine’s barely formed government to consolidate power over the economically crippled country of 45 million.

In Brussels, the European Commission, the EU’s executive arm, said its proposed emergency funding would be available once Ukraine strikes a loan agreement with the International Monetary Fund. The commission called for additional grants and project loans that could take the European contribution to more than 11 billion euros over seven years.

The European offer follows Kerry’s unveiling of $1 billion in loan guarantees in Kiev yesterday. An IMF team is in Kiev to assess the country’s needs. On March 1, Finance Minister Oleksandr Shlapak said it will take $15 billion in the next 2 1/2 years to stay afloat.

‘Difficult Situation’

Russian President Vladimir Putin, speaking at a government meeting at his residence near Moscow, said that he wanted to separate economic matters from politics in Ukraine. Russia should cooperate with all its partners and avoid an escalation, he said.

“No one should be placed in a difficult situation,” Putin said.

EU leaders including German Chancellor Angela Merkel and U.K. Prime Minister David Cameron are due in Brussels tomorrow for an emergency summit on Ukraine. When they meet, it’s important “to demonstrate that there are costs and consequences for Russia,” Hague said

Kerry and Lavrov are due to meet after an international conference on support for Lebanon. Earlier, Lavrov told reporters in Madrid that it is up to Crimea’s pro-Russian leaders to determine whether to admit international monitors to the region. He said any resolution must be based on last month’s accord struck between Poland, France and Germany and Ukrainian President Viktor Yanukovych.

“We hope that those who pushed the situation to where it is now will look to find a way out,” Lavrov told reporters. “And it’s possible on the basis of the Feb. 21 accord. Everyone must stand by the agreement signed. We should work honestly and not try to outsmart anyone by playing games in one’s own favor.”

(Source: Bloomberg)