Ukraine comes under economic pressure, truce takes hold

PanARMENIAN.Net - Ukraine came under greater economic pressure after unexpectedly banning most currency trading and then abruptly reversing course, wreaking havoc on the hryvnia, just as a truce in the east took hold on Wednesday, Feb 25 with no combat fatalities reported, according to Reuters.

With the long-awaited ceasefire coming into force, Russian President Vladimir Putin once again threatened gas supplies for the fourth time in a decade if Moscow did not receive advance payment.

In eastern Ukraine, pro-Russian militants were withdrawing heavy guns from the front. Kiev said it was too early to do likewise, but its acknowledgement that most of the front was quiet suggested it, too, could implement a truce that had appeared stillborn in the midst of a major militant offensive last week.

The war in the east has complicated efforts to stabilize an economy on the verge of bankruptcy, and the hryvnia currency has lost more than half its value so far this year after halving during all of 2014.

With the hryvnia currency in free fall as investors fled, the central bank halted nearly all commercial currency trading until the end of the week.

Hours later, the bank reversed the decision, giving no explanation for the abrupt change in policy. But it came after a sharp rebuke from Prime Minister Arseny Yatseniuk, who said the move was bad for the economy.

The ban had put the currency's true value in limbo, with little or no trading taking place to set a price, before the bank jumped in to buy $80 million at an official rate of 28.046 to the dollar, close to the rate at the start of the week and 12.8 percent higher than the close after a plunge on Tuesday.

Exchange booths in Kiev were selling limited amounts of dollars for 39 hryvnias, around 20 percent worse than rates advertised in the windows of commercial banks where dollars were not available.

Clearly concerned about the developments, the International Monetary Fund said on Wednesday it was ready to help Ukraine with its foreign currency issues.

In a potential new blow, the Kremlin warned that Russia could halt gas supplies to Ukraine, which could disrupt flows to Europe, which receives around a third of its gas from Russia with 40 percent shipped via Ukraine.

Last year Russia cut off gas to Ukraine for six months without affecting Europe.

Criticizing Ukraine for cutting off gas to eastern regions controlled by pro-Russian militants, Putin said, "Imagine these people will be left without gas in winter. Not only that there is famine ... It smells of genocide."

"We hope ... that gas supplies will not be interrupted. But this does not depend only on us, it depends on the financial discipline of our Ukrainian partners," Putin said.