Ukrainian troops queue to withdraw hryvnia cash from an automated teller machine in Artemivsk, Ukraine, on Feb. 20, 2015. Photographer: Vincent Mundy/Bloomberg

The VoxUkraine Brief: The military conflict, the renewed Naftogaz-Gazprom gas dispute, and the hryvnia`s meltdown

#VoxUkraine weekly selection of best articles on Ukraine.

by Veronika Movchan and Mykola Myagky, VoxUkraine Editorial Board

produced by Kseniya Alekankina

Last week, the military conflict, the renewed Naftogaz-Gazprom gas dispute, and the hryvnia’s meltdown in Ukraine were the focus of attention of the international media.

NATO commander warns about deteriorating situation in Ukraine

The fighting in eastern Ukraine is “getting worse every day” and Western efforts to deter Russian intervention are having little effect, NATO’s top military commander said Wednesday.

The probability of future ceasefire is also quite uncertain. Stephen Holmes and Ivan Krastev in their article “The Ukrainian School of War” argue that the current situation in Ukraine is “a European crisis with local implications”, and that the involved parties including Russia, the EU, and Ukraine — have too little common ground to achieve long-lasting compromise. The Ukrainian School of War

The ongoing turmoil in Ukraine has frequently been compared to the Yugoslav crisis of the early 1990s — and, indeed, there are many similarities.

The gas dispute between Gazprom and Naftogaz flared up again. The situation strained after Naftogaz’s statement that Gazprom violated contractual relations by supplying gas, prepaid by Ukraine, to rebel-held territories of Donbas. In turn, Gazprom threatened to cut-off gas supply unless Ukraine makes a prepayment for new shipments.

Cash-strapped Ukraine struggles to keep Russia gas supplies

Cash-strapped Ukraine sought to buy time in its effort to ensure continued gas supplies from Russia, making a $15 million payment Friday to Moscow as it waits for international rescue loans to arrive.

Bloomberg reports that Ukraine will reduce gas imports from Russia over the first week of March, while talks regarding gas issues are expected early March in Brussels.

Ukraine Draws Out Prepaid Gas Flow Against Russian Cutoff Threat

Ukraine’s state energy company will cut natural gas imports from Russia to keep the fuel flowing for the next six days as the former Soviet allies prepare for European Union-brokered talks in Brussels on Monday.

Longer-term prospects of Ukraine-Russia-EU gas relations are analyzed in Paul Gregory’s article “Putin’s Gas Problem”. He explores the question how plausible the Russian treats are to get rid of Ukraine as a gas transit country.

Putin’s Gas Problem

Russia watchers are rightly focusing on the latest brittle ceasefire in Ukraine, seeking to discern President Vladimir Putin’s intentions there. But they would be wise not to overlook another unfolding struggle — one that will have profound long-term consequences for Europe and for Putin’s ability to exert pressure on the continent.

The economic situation also remained in focus as the Ukrainian currency, the Hryvnia, collapsed. The sharp devaluation, the challenging debt restructuring, and the slow bail-out are discussed in a new article of The Economist.

The day of reckoning

It may go down as one of the least effective bail-outs the world has ever seen.

Anders Aslund claims that hryvnia can be stabilized by a swift adoption of legislation required by the IMF and strict monetary policy of the NBU.

Anders Aslund: Ukraine can stabilize the hryvnia

This week, Ukraine has been hit by currency panic.

The Hryvnia devaluation and the central bank’s policies were at the centre of VoxUkraine debates this week. Yuriy Gorodnichenko and John Doe discuss the ways of alleviating pressure on Ukraine’s currency.

How to Stabilize Hryvnia

In recent days, hryvnia fell dramatically to new lows, threatening economic and financial stability in Ukraine.

In another VoxUkraine Editorial Pick, Roman Sulzhyk argues that “only full liberalization of currency regime will save Ukrainian hryvna”.

Only Full Liberalization of Currency Regime Will Save Ukrainian Hryvna

As with most men-caused incidents, in retrospect it’s always clear what decisions should or shouldn’t have been made to avoid disaster- I will attempt to do this analysis while it still may not be too late to avoid complete catastrophe.

Finally, recent decision of the NBU to tighten capital controls is analyzed by Yuriy Gorodnichenko from VoxUkraine.

In Defense of the NBU’s Capital Controls

The National Bank of Ukraine (NBU) tightened capital controls on February 23, 2015.

The standstill in economic reforms also contributes to growing uncertainties. The fourth round of monitoring of reforms’ progress in Ukraine conducted by VoxUkraine showed this standstill. The Index of Monitoring of Reforms stands at a meagre +0.3 points, the lowest value in four rounds. Progress was only registered in Governance & Anti-Corruption direction that gained +1.0 points thanks to new procedure for the appointment of senior managers of state enterprises.

Index for Monitoring Reforms (IMoRe). Release 4

The IMoRe value for the fourth monitoring period (February 9th –22nd 2015) stood at +0.3 points out of the possible range from -5.0 to +5.0 points.

Have a great week!

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