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Hundreds Of Ukraine Troops Surrender As Besieged Town Of Debaltseve Falls To Rebels

Last week, German equities soared to record highs with the Dax surpassing 11K, not only on the imminent arrival of the ECB's Q€ which provides a risk-less bid to all asset classes, but on news that a second Ukraine ceasefire had been achieved in Minsk. Well, just like the first Minsk "ceasefire" in September, one can promptly forget the just as "successful" second one, because overnight, after a several week siege, the Ukraine town of Debaltseve finally fell to rebel forces with "troops of Ukraine’s Armed Forces laying down arms en masse,” according to Donetsk rebel official Maxim Leschenko says, cited by Tass news service.

According to Reuters government forces started pulling out of the east Ukraine town on Wednesday after a fierce assault by the rebel separatists which Europe said violated a crumbling ceasefire. President Petro Poroshenko said before flying to the town of Debaltseve that more than 80 percent of his troops in the rail hub had already left following a heavy bombardment and street-by-street fighting despite the truce that took effect on Sunday.

As previously reported, according to the pro-separatists rebels the ceasefire does not apply to Debaltseve, which links the two rebel-controlled regions of eastern Ukraine, Donetsk and Luhansk.

Bloomberg adds, that "some Ukrainian troops are leaving the town as “full scale” street fighting continues following a small tank battle, Ilya Kyva, a deputy police chief of the Donetsk region, said by phone on Wednesday. Kyva wouldn’t say how many Ukrainian soldiers had left or how many still remained surrounded by the rebels. Ukrainian Eurobonds fell to a record as fighting was also reported near the coastal city of Mariupol."

And indeed, as the following map shows, the town's critical position between the key centers of Donetsk and Luhansk, made it inevitable that as east Ukraine seeks to consolidate its territory, the small city would fall.

 

By now the long-running spin on both sides is well-known: Poroshenko and the West say the rebel assault is being reinforced by Russian tanks, artillery and soldiers, though Moscow denies sending forces to join the battle for a region that President Vladimir Putin has called "New Russia".

"The actions by the Russia-backed separatists in Debaltseve are a clear violation of the ceasefire," European Union foreign policy chief Federica Mogherini said in Brussels, stepping up Western criticism of the rebel offensive on Debaltseve. "The EU stands ready to take appropriate action in case the fighting and other negative developments in violation of the Minsk agreements continue," she said, making an apparent threat of further economic sanctions on Moscow.

 

A German government spokesman said the Minsk agreement had been damaged though it made sense to try to implement it.

Putin showed no sign of backing down over Ukraine on Tuesday evening, when he urged Kiev's pro-Western leaders to let their soldiers surrender to avoid more bloodshed, adding that Ukraine troops already have access to US weapons.

Hours later, the Ukrainian troop withdrawal was under way. A Reuters witness saw weary Ukrainian troops, their faces blackened, some in columns, some in cars, arriving in Artemivsk, about 30 km (20 miles) north of Debaltseve.

"The withdrawal of forces from Debaltseve is taking place in a planned and organized way," said Semen Semenchenko, who heads the Donbass paramilitary battalion. "The enemy is trying to cut the roads and prevent the exit of the troops," he said on Facebook.

News of the withdrawal hit markets, as Ukraine CDS soared while sovereign bonds crashed, pushing the entire nation even further into pre-bankruptcy and hyperinflation limbo.

So much for the ceasefire, although now that the entire industrial heavy east Ukraine region belongs to the separatists, the next step appears clear: a referendum whether or not to join Russia, a la Crimea, with an implementation shortly thereafter. This decision will be only facilitated following Bloomberg news that Kiev has decided to halt electricity supplies to the rebel region in the east.  Perhaps the only question is whether fighting continues around Mariupol which would enable Russia to have a land corridor all the way to Crimea.