Ukrainian Opposition Warns Yanukovych as Currency Rattled (1)
Ukraine’s opposition warned President
Viktor Yanukovych that the country is running out of time to
solve its political crisis, while the hryvnia plunged to a five-year low against the dollar.
Vitali Klitschko, the head of the opposition UDAR party,
repeated demands yesterday for presidential elections or
constitutional change. Acting Prime Minister Serhiy Arbuzov said
a failure to compromise was weakening Ukraine. Parliament may
meet for a special session Feb 11 to discuss the issue, Speaker
Volodymyr Rybak said today.
The crisis was sparked when Yanukovych snubbed a co-operation pact with the European Union in favor of a $15 billion
loan and a gas-price cut from Russia. Seven demonstrators died
amid clashes last month as the opposition seized government
buildings in Kyiv and across the nation.
“We do not have time,” Klitschko said in a statement on
his website. “Every day or every hour counts. We should not
allow a new spiral of conflict.”
The hryvnia slumped as much as 2.6 percent to 9 per dollar
for a second day, according to data compiled by Bloomberg. The
currency erased losses yesterday amid speculation the central
bank intervened, Tim Ash, chief emerging-markets economist at
Standard Group Plc in London, said by e-mail.
Currency Intervention
Some Kyiv banks have run out of dollars, Ukraine’s Channel
5 reported yesterday. The central bank sold dollars for a second
day to support the currency, according to the Interfax-Ukraine
news service.
The central bank “has and will” intervene to support the
hryvnia “when needed,” Valeriy Lytvytskyi, an adviser to the
central bank governor, told reporters today. The regulator has
spent “hundreds of millions” of dollars to support the
currency, he said.
“The hryvnia rate’s fluctuation will be back to normal, we
are working on that,” Lytvytskyi said. “We don’t see reasons
for the tendencies of recent days to become permanent.”
The central bank “appears to have no power to stop the
hryvnia devaluation,” Tatiana Orlova, an economist at Royal
Bank of Scotland Group Plc in London, wrote in a report today.
Reserves Shrink
Reserves (UAINRSL) probably shrank to $18.8 billion in January from
$20.4 billion a month earlier, according to the median estimate
of seven analysts surveyed by Bloomberg. That would tie November
for the lowest level since 2006. Reserves fell to $17.8 billion
as of yesterday, the Interfax news service reported, citing an
unidentified financial-market participant. The central bank will
report the figure tomorrow.
The cost to insure Ukrainian debt against non-payment for
five years using credit-default swaps rose 89 basis points, or
0.89 percentage point, to 1,089, the highest since Dec. 10 on a
closing basis, according to prices compiled by data provider
CMA. The yield on government bonds due June jumped 131 basis
points to 16.1 percent, the highest since Dec. 13.
Yanukovych supporters said the opposition’s failure to
compromise was hurting the hryvnia after the president accepted
his ally Prime Minister Mykola Azarov’s resignation and offered
to share power.
“Political instability is putting pressure on the foreign
currency market,” Arbuzov said at a government meeting
yesterday. “Every extra day of confrontation and unwillingness
to reach a compromise makes our country weaker.”
The central bank’s dwindling war chest and collapsing
hryvnia are a risk to Ukraine’s financial stability, according
to Fitch Ratings. They also threaten to intensify a selloff that
has made the nation’s bonds the worst-performing in Europe this
year, even after a rebound in the last two days amid speculation
an aid package may be forthcoming from the European Union and
the U.S.
Aid Stop
Russia, which bought $3 billion of Ukrainian bonds in
December to help avert a default, has delayed the next tranche
of aid until after it studies policies from the new government.
The U.S. may back the International Monetary Fund or an
international aid package to a new Ukrainian government, State
Department spokeswoman Jen Psaki said in Washington yesterday.
While no decision has been made, a loan may be approved before
new elections, she said.
EU Sanctions
In a non-binding resolution today, the European Parliament
called for the “preparation” of sanctions against regime
officials, lawmakers and their “business sponsors.” The
document also foresees a full-time EU Parliament mission to Kyiv
to act as a mediator.
Sanctions require a unanimous decision by the 28 national
governments. They will consider their next moves on Feb. 10 when
EU foreign policy chief Catherine Ashton chairs a meeting of
foreign ministers in Brussels.
Ashton was in Kyiv to meet with both sides and said there
is “great concern to see that those who have committed violence
are brought to justice.”
“The focus right now is on the diplomatic engagement,”
Ashton’s spokeswoman, Maja Kocijancic, told reporters in
Brussels today. “All 28 foreign ministers will look at the
situation on the ground and what kind of steps the European
Union should take.”
Russian President Vladimir Putin’s spokesman warned in an
interview on Kommersant FM radio that the country’s growing debt
for natural gas was “concerning.” Ukraine owes $3.3 billion
for gas supplies in 2013 and January.
Protesters continue to face off against police across
barricades in central Kyiv. Viktor, a 46-year-old entrepreneur
from Rivne in western Ukraine, said he wouldn’t leave until
early elections are called or until the adoption of the 2004
constitution, which would lessen presidential power.
“We support Klitschko as long as he supports the people’s
will,” said Viktor, who refused to give his last name for fear
of reprisal, as he helped guard the barricades in improvised
body armor. “Sanctions against Yanukovych’s gang are the way to
negotiate. Money is the only thing that they understand, and
sanctions would get their attention.”
To contact the reporters on this story:
Jake Rudnitsky in Kyiv at
jrudnitsky@bloomberg.net;
Daryna Krasnolutska in Kyiv at
dkrasnolutsk@bloomberg.net;
Kateryna Choursina in Kyiv at
kchoursina@bloomberg.net
To contact the editors responsible for this story:
Balazs Penz at
bpenz@bloomberg.net;
James M. Gomez at
jagomez@bloomberg.net