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Ukraine Now Battles Economy as Fighting Slows

by VOA News February 25, 2015

As a cease-fire with separatists appeared to be taking hold in eastern Ukraine, Kyiv struggled with a collapsing currency and Russian threats to its natural gas supply on Wednesday.

Ukraine's military for the second consecutive day reported a 'significant reduction' in attacks by pro-Russian rebels on Wednesday, as well as no combat fatalities for its troops in the past 24 hours.

And while pro-Russian separatists were said to be withdrawing heavy guns from the front in rebel-held areas in eastern Ukraine, Kyiv said it would not pull back its weapons until the rebel attacks cease completely.

The cautious good news over the troubled cease-fire, which was to have taken effect February 15, was overshadowed by dire economic news for the country, which is teetering on the brink of bankruptcy.

The value of Ukraine's free-falling hryvnia was in limbo Wednesday after the central bank banned nearly all commercial currency trading until the end of the week, a decision Prime Minister Arseniy Yatsenyuk denounced as bad for the economy.

The central bank said the move was necessary to stabilize the currency amid "unfounded" demand for foreign exchange.

Hours after imposing the ban, the central bank offered to buy dollars for 21.7 hryvnias, meaning anyone forced to sell would receive a third less than the last recorded market rate before the ban, and around half the rate available on the street.

After later emergency talks with Yatsenyuk, Finance Minister Natalia Yaresko and central bank chief Valeria Gontareva, President Petro Poroshenko's office announced a package of measures had been prepared to stabilize the currency. No details were immediately given.

A news conference was called for 5 p.m. (1500 GMT).

The hryvnia has lost at least half its value so far this year after halving over the course of 2014.

Natural gas deadline

Meanwhile, Alexei Miller, the CEO of Russian gas company Gazprom, said Wednesday Russia would stop exporting natural gas to Ukraine unless it received prepayment from Kyiv for energy supplies, Interfax reported.

Gazprom also said that Ukraine had approximately three days left of prepaid gas deliveries from Russia, Interfax reported, citing a letter from Miller to the head of Ukraine's state energy company Naftogaz.

President Vladimir Putin said it 'will create a problem' for gas transit to Europe, if gas to Ukraine is shut off, but he told reporters Wednesday he hoped it would not come to that.

Europe receives about a third of its gas from Russia, with 40 percent shipped through Ukraine.

Ukraine had also stopped delivery of natural gas to the Donetsk and Luhansk provinces, citing battle-damaged pipelines. But Putin said Wednesday Kyiv's refusal to supply natural gas to separatist regions 'smelled of genocide."

In the past decade, Russia has stopped natural gas deliveries to Ukraine three times: 2006, 2009 and 2014, when it accused Kyiv of not paying its bill.

No troop fatalities

Positive signs that the truce may be coming into force was news that no Ukrainian troops had been killed in the past 24 hours and signs that the rebels were removing heavy artillery from the front.

The rebels have promised that the Organization for Security and Co-operation in Europe (OSCE) will 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.

The European security body reported some shelling and shooting at various locations, including near Shyrokyne, a coastal town where Kyiv has also reported fighting.

The Ukraine military nevertheless said the number of cease-fire violations had "significantly decreased" for a second straight night. No shooting was recorded at all in the Donetsk, Luhansk and Mariupol areas, it said.

Overall, rebels had fired shells and mortars 15 times and opened fire four times with light weapons during the 24-hour period, the military said.

Ukrainian military spokesman Andriy Lysenko said: "For now, there is still no order on the withdrawal of weapons, as the fighters have not yet fulfilled the first point of the Minsk agreement, to cease fire."

Not in compliance

U.S. Secretary of State John Kerry told lawmakers Wednesday Russia and separatist rebels were still not complying with a ceasefire in Ukraine, despite a lull in the killing.

'To date, neither Russia nor the forces it is supporting have come close to complying with their commitments," Kerry said, renewing warnings that Moscow would face further sanctions.

A day earlier, Kerry had said the Russians were persisting in 'lies … to my face' about their activities in Ukraine. The U.S. dismisses Moscow's denials about giving military backing to the separatists in east Ukraine.

On Wednesday, a U.S. official told VOA: 'The separatist movement at this point is a de facto extension of the Russian military and an instrument of Russian national power. The Russian military has also put in place a robust command structure in eastern Ukraine, ranging from Russian General Officers overseeing operations down to junior officers.

The official continued, 'Russian forces are participating in the fighting in eastern Ukraine. Russian military personnel have participated in the recent attacks on Vuhlehirsk and Debaltseve. Russian units along the border with Ukraine are preparing shipments of supplies to pro-Russian forces fighting in eastern Ukraine. Russian combat forces also remain deployed near the Ukrainian border.'

Kerry said additional sanctions against Russia were "teed up" should events in eastern Ukraine require a significant response.

European Union President Donald Tusk also warned that the EU would not hesitate to impose new punishment on the separatists and Russia if the latest Ukraine peace deal collapses.

Elsewhere, Britain ruled out deploying combat troops to Ukraine a day after it said it was sending 75 military trainers to help the Ukrainian army. Poland said it intended to send military instructors to train Ukrainian soldiers.

In Washington, a U.S. military official said Tuesday the Pentagon also will be deploying a small number of troops to Ukraine to provide combat medical training.

Jeff Seldin contributed to this report from the Pentagon. Some material for this report came from Reuters and AFP.

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