FORTUNE — Western sanctions against Russia look likely to stay in place after President Vladimir Putin refused Friday to give a clear sign that he would accept the results of Sunday’s presidential elections in Ukraine.
Putin told a conference in his home town of St. Petersburg that “we will respect the choice that the Ukrainian people make,” but immediately qualified his answer by saying that the current conditions in the east of the country—which he described earlier as ‘an all-out civil war’–made it impossible to have a proper vote.
Only yesterday, pro-Russian separatists killed 16 Ukrainian soldiers at an ambush in the region of Donetsk. The interim Ukrainian government accuses Russia of arming and organizing the separatists. The separatists who have taken de facto control of the Donetsk and Luhansk regions have already proclaimed their independence and said they won’t allow the vote to take place.
Throughout, Putin hinted at conciliatory gestures while railing against the west for causing the crisis. He noted that he still considers Viktor Yanukovych — who fled to Russia after being overthrown by violent protests in February — as Ukraine’s legitimate president.
Markets decided to focus on the positives and pushed the ruble up by 0.6% against the dollar-euro basket used by the central bank to steer the exchange rate. It’s risen 2.1% against the basket this week and is now some 10% up from its lows in March.
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US and European leaders have warned Russia that a new round of sanctions would follow if it sabotages the elections, but have also indicated that relations could start to return to normal if it accepts the results of the vote. Officials in Kiev have accused Russia of organizing various attempts to undermine the poll.
The current leader in the polls is candy billionaire Petro Poroshenko. Asked whether he could work with Poroshenko, Putin said “a good way to build confidence” would be for Ukraine to pay the $3.5 billion that it owes Russia for gas deliveries.
Putin admitted that the sanctions announced so far — which have largely been limited to individuals close to him rather than to the companies that drive the Russian economy — had hurt a bit, but had not had “a substantial or systemic impact.” Market forces and risk aversion have taken a bigger toll:
Russia’s economy has slowed sharply as international financial markets have closed to the country’s companies, and spooked citizens have sought to move their assets abroad.
A record $63.7 billion in capital flowed out of Russia in the first quarter, although central bank governor Elvira Nabiullina said that slowed to $4.6 billion in April, according to news agency reports. The International Monetary Fund expects Russia to grow by only 0.2% this year, after 1.3% last year.
“We aren’t planning to isolate ourselves,” Putin said. “We hope that common sense…will lead our European and U.S. Partners to work with Russia.”