Collapsing currency threatens Ukraine

No casualties as hopes that long-awaited ceasefire will hold

Ukraine came under increasing economic pressure from a collapsing currency and a threat to its gas supplies from the Kremlin, just as a long-awaited ceasefire took hold in the east.

As the truce appeared to be coming into force, the Ukrainian army reported no combat fatalities in the past 24 hours, but the news did nothing to halt a currency collapse that forced the central bank to ban most trading.

In rebel-held eastern Ukraine, pro-Russian separatists 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 when the rebels launched a major offensive last week.

The cautious good news from the front has come amid dire economic consequences for a country teetering on bankruptcy.

With the hryvnia currency in free fall as investors flee, the central bank called a halt by banning nearly all commercial currency trading until the end of the week.

Prime Minister Arseny Yatseniuk said the ban was bad for the economy.

He had learned about it on the internet and would demand an explanation from the central bank chief Valeria Gontareva.

The central bank said the move was necessary to stabilise the currency amid “unfounded” demand for foreign exchange.

In a potential new blow, President Vladimir Putin warned that Russia would halt gas supplies to Ukraine, for the fourth time in a decade, if Moscow did not receive advance payment. That could disrupt flows to Europe, which receives around a third of its gas from Russia.

Criticising Ukraine for cutting off gas to eastern regions under the control of the pro-Russian separatists, 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.

News that no Ukrainian troops had died at the front was by far the most unambiguous signal yet that the French- and German-brokered truce is now holding.

The rebels had initially spurned the ceasefire, insisting it did not apply to their main target, the town of Debaltseve, which they stormed last week.

Kiev has since accused the separatists of reinforcing for a possible further assault deeper into territory the Kremlin calls ‘New Russia’. But for now, the fighters appear determined to be seen to implement the agreement.

Kiev fears the rebels, backed by Russian troops, may now be planning to capture Mariupol, a port of 500,000 people. Moscow denies aiding its sympathisers.