Poroshenko Ends Trip to US as Hryvnia Plunges to Record
Ukrainian President Petro Poroshenko headed home after a visit to the U.S. without a
pledge of weapons to fight pro-Russian separatists as clashes
continued and the country’s currency plunged to a record.
Poroshenko secured no lethal aid, getting a $53 million
package of economic and military assistance from the U.S. during
a trip that included a meeting with President Barack Obama and
an address to Congress. The hryvnia, already the world’s worst-performing currency this year, tumbled 11 percent to 14.40 per
dollar as of 7:10 in the capital, Kyiv, according to data
compiled by Bloomberg. It’s down 43 percent this year.
The move “is a huge eye-opener,” Simon Quijano-Evans, the
London-based head of emerging-market research at Commerzbank AG,
said by e-mail. “What Ukraine needs the most is a ‘normalized’
backdrop without conflict within its borders that can allow it
to move on. Without that, any detrimental economic and financing
scenario can be envisaged.”
Ukraine is mired in its bloodiest crisis since World War II
as it battles a pro-Russian insurrection in the eastern regions
of Donetsk and Luhansk that erupted after Russia annexed Crimea
in March. The government sought to shore up its finances with a
$17 billion International Monetary Fund bailout signed in May as
the country contends with its first recession since 2009.
International reserves jumped $3.67 billion in May to
$17.9 billion before retreating to $15.8 billion last month.
Liquidity Shortage?
The drop in the hryvnia was probably linked to a “lack of
foreign-exchange liquidity in the market,” according to
Commerzbank. The central bank sold $44.5 million at the cutoff
price of 13.55 per U.S. dollar at an auction today and plans a
$200 million offering on Sept. 23, Interfax reported, citing the
regulator’s press service.
Ukraine may need another $19 billion in financial
assistance by the end of next year if the conflict in its
eastern regions rages on through 2015, the IMF said Sept. 2.
Poroshenko was in Washington just days after the U.S. and
the European Union toughened their sanctions on Russia over its
sending forces into Ukrainian territory. The government in
Moscow denies involvement in the conflict.
Minsk Talks
In the meantime, talks continued in Minsk, Belarus, where
the representatives of Ukraine, Russia, the Organization for
Security and Cooperation in Europe and the separatists hammered
out the cease-fire agreement two weeks ago. The Foreign Ministry
of Belarus, which organized the event, didn’t provide details
about the participants or the agenda.
While the truce is formally still in effect, reports of
violence in Ukraine’s easternmost regions continued.
Ukraine’s military said today rebels shelled government
troop positions overnight in the Donetsk region, where an
attempt to retake the main airport failed. Two Ukrainian
soldiers were killed, three wounded and six went missing in the
past 24 hours, Andriy Lysenko, a spokesman for the country’s
military, told reporters in Kyiv. He also accused Russian
aircraft of violating Ukrainian airspace at high altitude and
drones of crossing the border.
Representatives of Ukraine, Russia and the EU agreed to
meet in Berlin next week to resume talks about natural gas
supplies. Russia won’t change its position at the Sept. 26 talks
as a price dispute between the world’s largest energy exporter
and Ukraine is still in international arbitration, Russian
Energy Minister Alexander Novak said today.
Gas Dispute
Russia halted gas supplies to Ukraine, a key westward route
for its energy, on June 16 in a dispute over debt and prices.
Spats between the two nations led to disruptions in 2006 and
2009, leaving some European customers short of fuel. Poland is
still getting less Russian gas than ordered, Piotr Kus, director
at the Brussels office of the country’s grid operator, said in
London today.
OAO Gazprom (GAZP) Chief Executive Officer Alexey Miller said
today that the European market remains “No. 1” for the
company, which sees its share there at above 60 percent this
year.
Yesterday’s was the third in-person meeting between Obama
and Poroshenko since the Ukrainian president was elected in May.
It underscored the priority Obama has placed on resolving the
conflict, which has resulted in the deepest rift since the Cold
War between the U.S. and its European allies and Russia.
While Obama didn’t answer a question from reporters about
lethal aid following the White House meeting, his press
secretary, Josh Earnest, said a diplomatic solution is
preferable to a bigger war.
U.S. Aid
The new $53 million aid package includes $46 million in
non-lethal military equipment, such as body armor, first-aid
kits, binoculars, and other surveillance gear, plus about $7
million in humanitarian aid for people displaced by the Russian
intervention in eastern Ukraine. Total U.S. aid to Ukraine for
the year is now $291 million, plus a $1 billion loan guarantee.
In a sign of further international assistance, the defense
ministers of Poland and Lithuania, two former Soviet-bloc
countries that are now in NATO, signed an agreement today with
their Ukrainian counterpart about forming a mixed brigade.
The unit will be deployable on United Nations peacekeeping
missions.
“The way to contain Russia is to stay tough and keep them
unsure that they can impose their will,” Komorowski said today
at a conference in Bialystok, Poland. “No actions should be
taken toward Russia that could be interpreted as rewarding
aggression.”
To contact the reporters on this story:
Heidi Przybyla in Washington at
hprzybyla@bloomberg.net;
Volodymyr Verbyany in Kyiv, Ukraine at
vverbyany1@bloomberg.net;
Aliaksandr Kudrytski in Minsk, Belarus at
akudrytski@bloomberg.net
To contact the editors responsible for this story:
Jodi Schneider at
jschneider50@bloomberg.net;
Balazs Penz at
bpenz@bloomberg.net
Paul Abelsky, Balazs Penz