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 nation’s east took hold on Wednesday.
However, Russian President Vladimir Putin threatened Ukraine’s gas supplies for the fourth time in a decade if Moscow did not receive an advance payment.
In rebel-held eastern Ukraine, pro-Russia separatists were reportedly withdrawing heavy guns from the front. Kiev said that it was too early to do likewise, but its acknowledgment that most of the front was quiet suggested that it, too, could implement a truce that had appeared stillborn amid a major rebel offensive last week.
Photo: Reuters
The conflict has complicated efforts to stabilize an economy on the verge of bankruptcy, and the hryvnia has lost more than half its value this year, after halving during last year as a whole.
With the hryvnia in free fall as investors fled, the Ukrainian central bank halted nearly all commercial currency trading until the end of this week.
Hours later, the bank reversed the decision, giving no explanation for the abrupt policy change.
However, the move came after a sharp rebuke from Ukrainian 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 US$80 million at an official rate of 28.046 hryvnia per US$1, close to the rate at the start of the week and 12.8 percent higher than the close after a plunge in Tuesday trading.
Exchange booths in Kiev were selling limited amounts of US dollars for 39 hryvnias, around 20 percent worse than rates advertised at commercial banks, where US dollars were not available.
In a potential new blow, the Kremlin said that Russia could halt gas supplies to Ukraine. Doing so could disrupt flows to Europe, which receives about one-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 withholding gas from rebel-held regions. 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 added.
News that no Ukrainian troops had died at the front was the most unambiguous signal yet that the truce brokered by France and Germany was taking root.
The rebels had initially spurned the ceasefire, saying that it did not apply to their main target, the town of Debaltseve, which they stormed last week.
The rebels have promised that the Organisation for Security and Cooperation in Europe (OSCE) would soon be able to verify that they have removed all heavy guns.
The OSCE said it cannot yet verify the withdrawal because the sides have not provided data on how many guns were in place before the truce.
Kiev’s military nevertheless said the number of ceasefire violations had “significantly decreased” for a second night. No shooting was recorded in the Donetsk, Luhansk and Mariupol areas, it said.
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