Yesterday, we noted in our daily Watch List that there are some indications the Russians might be building up their forces east of Ukraine. Today, Russian President Vladimir Putin publicly warned Ukraine. He declared that Ukraine is engaging in terrorism and that the recent deaths of two Russian servicemen will not be ignored. The recent escalation in tensions on the ground, coupled with Putin’s warning to Ukraine, signal that either Russia is preparing to take action in Ukraine, or that the Kremlin is engaging in a high-stakes bluff to enhance its negotiating position when it comes to Ukraine’s future status. At this juncture, it is impossible to ascertain whether Putin is bluffing. As a result, assessing Russia’s goals and closely watching developments on the ground are key.
 
Speculation regarding potential Russian military moves in Ukraine over the past few days began when the Luhansk People’s Republic put its forces on full combat readiness after an alleged assassination attempt on the separatist republic’s leader. There have also been unconfirmed social media reports of fuel shortages in Donetsk and Luhansk, with fuel reportedly being moved to troops along the front lines. Meanwhile, a Ukrainian government spokesman claimed Russian forces are on the move and could attack at any time.
 
Earlier today, the FSB announced that over the weekend it thwarted two attempted armed Ukrainian incursions into Crimea and that a Russian soldier and an FSB employee were killed in the ensuing clashes. Putin referred to the alleged incursions, as well as to the assassination attempt in Luhansk, as acts of terror. He also referred to Ukraine’s actions as a “dangerous game” and declared that Russia “obviously will not let such things slide by.”
 
Putin also stated, “it looks like the people who have seized power in Kiev and continue to hold on to it, instead of looking for the compromises that we have talked about in relation to the Nagorno-Karabakh conflict, instead of looking for ways to reconcile peacefully, they have resorted to terrorist practices.” He added, “this is very worrying information. Security services have, in fact, prevented the intrusion of a Ukrainian Defense Ministry sabotage and reconnaissance mission from Ukrainian territory. And, of course, holding a meeting in the Normandy format in China given these conditions is pointless.” Meanwhile, the Ukrainian authorities are reporting heightened Russian military activity in Crimea, close to the administrative border with Ukraine. The situation to the east of Ukraine, however, remains unclear.
 
Putin’s public declaration comes after an intensification in fighting in Donbass over the past two months. Observers from the Organization for Security and Co-operation in Europe (OSCE) noted that in June ceasefire violations began rising and noticeably heavier weapons – in theory banned on the contact line – were being used. In fact, for Ukrainian troops, July was the deadliest month since August 2015, with 42 troops killed.
 
At the same time, Russia has over the past few months opted to boost its western defenses and move troops closer to the Ukrainian border. In late July, Russian Defense Minister Sergei Shoigu publicly explained that since 2013 Russia has created four new divisions, nine brigades and 22 regiments, deploying them in the Southern Military District – close to Ukraine’s borders – and in the North Caucasus region.
 
Russia has traditionally opted to raise tensions and then lower them in advance of military action. Nevertheless, the Kremlin is also adept at playing diplomatic chess games with world powers and has been engaged in a complex negotiation with the U.S. over both Syria and Ukraine. Ukraine is not in a position to threaten Russia. Putin is likely keeping his options open. It is too early to tell what Russia is trying to accomplish; we will be watching both the Kremlin and the situation on the ground closely over the coming days and weeks.