Ukraine Raises Key Rate to World’s Highest to Stem Currency Rout

[Purveyor]

Source: Bloomberg

by Volodymyr VerbyanyMarton Eder
6:20 AM EST March 3, 2015

(Bloomberg) -- Ukraine’s central bank raised its benchmark interest rate to the world’s highest, the fifth emergency move since the beginning of last week to arrest a plunge in the hryvnia as the nation moves closer to obtaining a bailout.

The National Bank of Ukraine raised its refinancing rate to 30 percent from 19.5 percent, effective Wednesday, to “stabilize the situation on the money and lending markets,” Governor Valeriya Gontareva told reporters in Kiev. That’s the highest benchmark among all countries tracked by Bloomberg.

Policy makers are staggering from the turmoil wrecking the economy as the hryvnia, the world’s worst performer in the past year, spurs panic buying among shoppers and destabilizes banks. Before opting to push the key rate to the highest since 2000, the central bank in Kiev used tighter capital controls and a one-day freeze on currency trading to steady the hryvnia.

“The picture is being blurred: every day a different measure is taken,’” Simon Quijano-Evans, head of emerging-market research at Commerzbank AG in London, said by e-mail. “What the local population in particular needs is a clear policy picture from the central bank.”

Read more: http://www.bloomberg.com/news/articles/2015-03-03/ukraine-central-bank-increases-refinancing-rate-to-30-

[Monk06]

1. I wonder if this isn't the centerpiece strategy of Putin in this crisis. Destroy the hryvnia and

force the country to denominate in Euros, Dollars or both.

Endgame Ukraine is a failed state and the West has to pay the Ukraine's debts and still has to buy Russian gas. Saudi Arabia will tire quickly of losing revenue by artificially depressing energy prices.

Check and Mate goes to Putin.

[happyslug]

4. Don't assume conspiracy when stupidity or or CYA will suffice.

Last edited Wed Mar 4, 2015, 10:04 AM - Edit history (2)

Putin has no objection to the Ukraine going bankrupt, he controls the natural gas supplies and knows he will be paid unless the Ukraine wants the gas turned off. The Ukraine going bankrupt helps the rebels in the Eastern Ukraine, they get supplies from Putin, the Ukrainian forces get nothing. The price to Putin in minimal, mostly old Soviet Equipment that have been stored in reserves since the 1990s.

In many ways Putin wants a united and strong Ukraine, but a Ukraine NOT hostile to Russia. Putin does NOT want to many Russians involved (Except for volunteers who are clearly volunteering for service in the Ukraine) again to minimize costs to Putin. This is all CYS, covering his ass. The stupidity is on the Ukrainian side, fighting a war against a much larger neighbor, when you do NOT have overwhelming support to fight that war. Cut a deal with the Rebels and end this conflict before it drives you bankrupt. Putin has been pushing for a federation, agree to it and leave the East do as it pleases while maintaining control over Kiev.

Most of the East drains into the Don NOT the Dnieper so it has always been more Russia then Ukrainian in the first place.

Sidenote: Do to the fact the Steppes are Flat from Poland to the Pacific, people tended to concentrate on the main means of transportation in Steppes, i.e. the Rivers. Thus the Poles are concentrated on the Vistula, the Ukrainians on the Dnieper, the Russians along the Volga. The Volga is within 50 miles of the Don, thus the Don has always been considered a Russian Rivers, and has clearly become one since the opening of the Canal between the Volga and the Don after WWII. Actual work on a Canal began in the early 1700s, but was later abandoned as it was found given the flat terrain wagons were good enough for most purposes (and the even flatter terrain between the Black Sea and the Caspian Sea provided even easier transport). All of this made the Don a part of the Volga River transportation network and thus a solid part of Russia.

http://en.wikipedia.org/wiki/Volga%E2%80%93Don_Canal

http://en.wikipedia.org/wiki/Eurasia_Canal

http://en.wikipedia.org/wiki/Manych_Ship_Canal

Given this history the Don and its tributaries should be viewed as part of Russia, but Lenin wanted to make the Ukraine bigger then that part of the Dnieper River drainage the Soviet Union Controlled in the 1920s (Poland ended up with much of what is now called the Western Ukraine in the post WWI fighting between Poland and the Soviet Union). Do to this desire to make the Ukraine larger some, but not all of the Don Drainage area was given to the Ukraine. When Poland gave up its Eastern lands after WWII, that became part of the Ukraine, but the Ukraine never had to give up its Eastern lands (Poland gave up its Eastern Lands for Western Lands Poland received from Germany post WWII). Thus when the Soviet Union broke up, the Ukraine extended to included part of the DON and its Russian Speaking majority. The border should have been adjusted but the Ukraine wanted to keep all of the Soviet Ukraine and Russian did not see the Ukraine being anything but its satellite so the borders remain as they were.

Just a comment that the Ukraine would be better off accepting the fact the Eastern Ukraine is economically part of Russia and has been since the 1700s for the Don and Volga get so close that the Russian Population of the Volga reached into the Don Drainage system, much more then the Ukrainian population, centered on the Dnieper, overlapped the Don River Drainage System.

The Ukrainian Government should accept the fact that the Eastern Ukraine is economically tied in with Russia and to separate it from Russia would be viewed by the people of the Eastern Ukraine as an direct attack on them. Federate and give the Eastern people of the Ukraine the ability to make sure the actions of their Government is NOT actions against the people of the Eastern Ukraine.

[Monk06]

5. Thanks for putting the Geo in Geopolitical. I wasn't aware of the compexity of the geopolitical,

ie geographic/political shifts in this region. Like most I assume the borders of the countries have a traditional cultural/linguistic rationalalle.

You should post your analysis on similar threads where appropriate.

Most people don't know for instance that the Kingdom of Ukraine at one time covered what is now Russia almost to the city of Moscow. So it has been tit for tat for a long time.

My observations aren't conspiratorial by the way. The merely point out that Russia has an previously unobserved financial warfare opportunity give the way things are playing out. Especially with the Ukrainian currency collapse.

[happyslug]

17. Rivers were and are the most important transportation system in the Steppes.

And the population of the Steppes tend to be tied in with those Rivers. Vistula is the heart of Poland, the Dnieper south of the Pripyat marshes is the heart of the Ukraine, the Volga River, the Don River, the Northern Dvina River and the Canal to the Baltic and St Petersburg is the heart of Russia

http://en.wikipedia.org/wiki/Northern_Dvina_River#Navigation_and_canals

http://en.wikipedia.org/wiki/Volga%E2%80%93Baltic_Waterway

http://en.wikipedia.org/wiki/Northern_Dvina_Canal

http://en.wikipedia.org/wiki/Volga%E2%80%93Baltic_Waterway


The Pripyat River which flows into the Dnieper, and the marshes that surround the Pripyat river (the Pripyat or Pinsk Marshes, the largest marsh/swamp in Europe) is the heart of modern day Belarus. The Pripyat Marshes is what separate Belarus from the Ukraine.

http://en.wikipedia.org/wiki/Dnieper_River

http://en.wikipedia.org/wiki/Pinsk_Marshes

Now, Poland is generally NOT considered part of the Steppes, but the North European Plain. That Plain is the widest in Poland, and merges with the Steppes as you enter Belarus and the Ukraine. Westward from Poland the North European Plain narrows as one crosses the Plain into Germany at the Oder River (The Sleasian Mountains help form this northern narrowing of the Plain). The Plain continues across northern Germany (Some Geographers include Denmark and Southern Sweden in the North European Plain others do not), but does include the Netherlands and most of Belgium as while as South Eastern England. Berlin is in the North German Plain. The Green in the following map shows the Plain in Germany:



http://en.wikipedia.org/wiki/Natural_regions_of_Germany

In many ways the Elbe as it flows through the North German Plain (the name the North European Plain is given in Germany) does for Northern Germany what the Vistula, Volga and Dnieper does for the Poles, Russians and Ukrainians.

http://en.wikipedia.org/wiki/North_European_Plain

As you go east from the Volga, you run across the Ural River but it has never been much of barrier to east-west travel and as the Russian Farmers went east, they took over the Ural River Valley then moved into Kazakhstan the Siberia. Except for the Amur, all of the Rivers of Siberia flows into the Arctic, thus best used to go from one branch of that River's drainage system to another branch of that system that is close to a branch of the next river drainage system. Horse drawn wagons could go on such plains without much trouble, but once you are talking about much weight going by boat as much as possible was easier and cheaper.

Thus the Ob. Yenisei and Lena rivers were the key to Russian Expansion into Siberia:

http://en.wikipedia.org/wiki/Ob_River



http://en.wikipedia.org/wiki/Yenisei_River



http://en.wikipedia.org/wiki/Lena_River



The Amur is the exception to this rule, Russia shares the Amur Drainage System with China:



http://en.wikipedia.org/wiki/Amur_River

Map of the Siberia River Routes, pre Trans-Siberia Railway:



http://en.wikipedia.org/wiki/Siberian_River_Routes

Today, the Trans-Siberian railway does almost all of the east-west movement, but the rivers are used extensively for North-South freight traffic.



The trans-Siberia connects with Chinese Railway lines in Manchuria AND Kazakhstan, through movement by train requires a switch in tracks once one cross the Russian or Kazakhstan border into or out of China (Russia uses 5 foot gauge, China uses standard, 4 foot 8 inch gauge tracks) and then back to Standard Gauge as one leave or enters Russia or the Ukraine (Poland and Germany, like China uses standard Gauge). These routes permit movement of freight by rail almost as cheaply as by ship. Recently China and Russia have worked out ways to get Freight from China to Europe faster by Train then by ship (Two weeks via one month) and have even done such train service between China and Germany. That requires a lot of cooperation between Russia, Kazakhstan, China, Poland and Germany to get the system to work but it worked do to the RIVERS being able to supply much of the traditional freight on the Trans-siberian railway. Thus the Rivers of Russia are still important.

[MattSh]

3. Police beating people protesting currency collapse in Kiev

This from last week, but there were more protests at the National Bank today. And police threatening to shoot to kill.

Nice government you've got there.

[elias49]

6. Kick

[bemildred]

7. Ukraine looks ready to default

The conflict in the Ukraine is relevant to global investors as it directly affects security in Europe, which is the home of an economy the size of the U.S. The trade bans due to conflict-driven sanctions involve many countries and add to the European deflation at present. Those trade bans might get wider should the conflict intensify based on the realization that a political solution would not give the rebels and their Russian backers what they want — enough autonomy to keep Ukraine out of the EU and NATO.

I do not follow this conflict to determine who is right or wrong but to gauge how it affects financial markets. Most of my conclusions may seem relevant only to institutional investors that deal in currencies, sovereign bonds, credit-default swaps (CDSs), and the energy markets, but I do believe those geopolitical developments affect quite a few individual investors, even those in the U.S.

Last week the Ukrainian truce barely took hold when fighting over the strategic Ukrainian town of Debaltseve, which controls rail lines linking Luhansk and Donetsk, threatened to unravel the ceasefire agreement. The rebels decided to take the town "no matter what," as a prolonged truce made it necessary for them to control logistics in their territory.

It has been clear for a long time that Ukraine is a divided country where half the population supports the rebels and the other half supports the government in Kiev — as demonstrated by this map of the 2010 election, which brought Yanukovych to power. This map also suggests this conflict can quickly carry all the way to Odessa, which Russian ruler Catherine the Great (1729-1796) turned into a key trading hub for the Russian Empire. There is also an unhappy minority of Russians in a strip of Moldova adjacent to Ukraine, where Russian peacekeepers have been stationed for years. It is entirely possible they see this conflict as the opportunity to resolve their situation once and for all.

http://www.marketwatch.com/story/ukraine-looks-ready-to-default-2015-03-03

[bemildred]

8. Russian Companies Continue Posting Increase in Sales, Plunge in Profit

While Ukraine increases the gas stored in its UGS facilities for the first time in some months, Russian and Kazakh companies keep posting mixed figures for 2014, hinting at two simultaneous trends. On the one hand, they report an increase in sales. On the other hand, their profits keep going down due to significant impairment and the weakness of the ruble.

These facts could suggest that in the medium term, Russian companies could significantly increase their exports.

On Tuesday, for example, Lukoil reported a year-on-year 1.9 increase in sales revenues.

“Net income in 2014 was negatively affected by $2,341 million non-cash losses due to asset impairment in Russia, Ukraine, Western Africa and Kazakhstan. Excluding the non-cash losses net income was $7,087 mln and EBITDA was $18,426 mln” the Russian company wrote on Tuesday.

http://www.naturalgaseurope.com/russian-companies-keep-posting-increase-sales-plunge-profit-22479

[bemildred]

10. Gazprom rallies on Ukraine Export Deal: Russia Overnight

(Bloomberg) -- OAO Gazprom rose for a fourth day as the Russian natural-gas producer’s temporary agreement with Ukraine on payments eased concern a standoff may disrupt exports to Europe shipped through the country.

The stock rose 2.4 percent to $5.14 in London on Tuesday, capping the longest streak of gains since late December. The rally pushed this year’s advance to 11 percent.

State-run Gazprom uses pipelines traversing Ukraine for about 40 percent of its shipments to Europe. The company had threatened to cut off supplies to the former Soviet republic, where pro-Russian separatists have been fighting the government for a year, when prepaid volumes run out. The shares rallied after officials confirmed during talks over a dispute about deliveries to rebel-held areas that Ukraine will keep paying for the fuel in advance under an interim deal signed in October.

“Smooth exports to Europe, Gazprom’s main market, mean a great deal to the company, and the agreement is positive for the stock,” Kirill Yankovskiy, the director of equity sales at Otkritie Capital Ltd. in London, said by phone on Tuesday. “Gazprom and Ukraine have proven yet again that both parties realize there is no alternative but a rational solution, and they find ways to reach an agreement.”

http://www.bloomberg.com/news/articles/2015-03-03/gazprom-rallies-on-ukraine-export-deal-russia-overnight

[bemildred]

12. Impotent Western Sanctions Fail To Disrupt Russian Energy Exports

Energy exports from Russia, in the form of coal, oil, natural gas and uranium, continue to flow unimpeded, despite Western efforts to damage the Russian economy for interfering in Ukraine.

In some ways, the sanctions have had the desired effect. But in others, notably the energy trade, they have failed, and in fact it could be argued they have backfired, by hurting the businesses that do business with Russia. Moreover, the sanctions have further isolated Russia from Europe and drawn it closer to alternative energy partners, namely Turkey and China.

To recap, in March of 2014 the United States and the European Union, along with other countries and international organizations, implemented a series of sanctions against individuals and businesses from Russia and Ukraine, in response to the perceived annexation of Crimea, a peninsula in southern Ukraine. Russia retaliated by imposing sanctions of its own, including a ban on food imports from the EU, US, Norway, Canada and Australia.

As the unrest continued into southern and eastern Ukraine, the sanctions were expanded. The first round targeted Russian and Crimean officials seen to have close ties to Russian President Vladimir Putin, with asset freezes and bans on travel. The second round, so-called sectoral sanctions, focused on major businesses and parts of Russia's financial, energy and military industries. Targets included Rosneft, Transneft and Gazprom.

http://oilprice.com/Energy/Energy-General/Impotent-Western-Sanctions-Fail-To-Disrupt-Russian-Energy-Exports.html

[bemildred]

9. Turkey Aims to Become Energy Hub for Russian Gas

ISTANBUL —

With Moscow declaring in the coming years that it will divert its gas supplies away from Ukraine and through Turkey to supply Europe, Ankara said it is a step closer to its goal of being a major gas hub. But critics point out Turkey still has many hurdles to overcome.

The deepening crisis in Ukraine could open the door to Turkey's decade long dream to become a regional energy hub. Political consultant Atilla Yesilada of Global Source partners said Moscow’s decision to use Turkey instead of Ukraine as a transit country to supply European markets is major opportunity for Ankara.

He said Turkey "will be replacing the supply that currently is being pumped through Ukraine."

"Now obviously ethically there are major questions here and diplomatically there will be big tensions," he added. "But economically speaking, the plan is feasible. Turkey simply becomes the next Ukraine and Turkey could become a major energy hub ... supplying Europe."

http://www.voanews.com/content/turkey-aims-become-energy-hub-russian-gas/2666431.html

[bemildred]

11. EU Gas Supply Safe Until March After Russia-Ukraine Deal

Moscow and Kiev have agreed that Russian gas shipments to all of Ukraine, including some rebel-held areas of eastern Ukraine, will continue through March, and so won’t interfere with the flow of fuel to Russia’s customers in the European Union, for now at least.

The agreement ends a dispute between the two countries’ state-run gas companies, Russia’s Gazprom and Ukraine’s Naftogaz, which had threatened a previous deal, mediated by the EU, to ensure gas supplies to Ukraine and the EU throughout the bitter winter months.

It also brought into question whether Russia and Ukraine could reach a subsequent agreement on deliveries of Russian gas during warmer seasons, beginning April 1.

Russian Energy Minister Alexander Novak and his Ukrainian counterpart, Volodymyr Demchyshyn, arrived at the deal the night of March 2 in Brussels under the mediation of Maros Sefcovic, the European Commission’s vice president for energy.

http://oilprice.com/Latest-Energy-News/World-News/EU-Gas-Supply-Safe-Until-March-After-Russia-Ukraine-Deal.html

[bemildred]

13. Ukraine MPs Mull Setting Up 'Parliament Police' after Tuesday Fight

A Ukrainian lawmaker has proposed the creation of a "parliamentary police" after a new brawl that ended up violently on Tuesday, Russian media report.

Dmitro Dobrodomov told Ukrainian TV channel 112 "serious fights" required the measure if such incidents are to be prevented in the future.

The fight emerged as Oleg Lyashko, the leader of the Radical Party, hit Sergey Melnichuk, a lawmaker who passed to the ruling majority and was called "carcass" by the former MP. The term is commonly used in Ukraine's Parliament, the Verkhovna Rada, for lawmakers who take the step, supposedly "for money" as MPs remaining in opposition usually argue.

http://www.novinite.com/articles/166950/Ukraine+MPs+Mull+Setting+Up+%27Parliament+Police%27+after+Tuesday+Fight

[bemildred]

14. Ukraine Armor Pullback If Rebels Adhere to Cease-Fire

(Bloomberg) -- Ukraine said its forces began the second stage of a pullback that will continue if a cease-fire holds as President Barack Obama extended U.S. visa bans and asset freezes on Russian officials and others involved in the crisis.

“The process of weapons pullback will take two weeks, but it’s clear that if situation is being changed we will correct the withdrawal schedule,” Ukraine military spokesman Vladyslav Seleznyov said by phone. The pullback of Akatsiya self-propelled artillery has started, Andriy Lysenko, a military spokesman said on Wednesday in Kiev.

The Minsk truce agreed on last month largely held during the past 24 hours even though Ukrainian forces were shelled 12 times by rebels since 6 p.m. Tuesday, Seleznyov said.

Ukraine’s government and its allies accuse Russian President Vladimir Putin of stoking the conflict by supplying the separatists with weapons, cash, intelligence and troops. Putin rejects the accusations. The standoff between the Kremlin and the European Union and NATO allies is the worst crisis between the former opposing blocs since the end of the Cold War. More than 6,000 people have been killed in the fighting, the United Nations estimates.

http://www.bloomberg.com/news/articles/2015-03-04/obama-extends-sanctions-against-russian-officials-over-ukraine

[bemildred]

15. Violence in east Ukraine kills one government serviceman - military source

http://in.reuters.com/article/2015/03/04/ukraine-crisis-military-idINKBN0M00UG20150304?rpc=401

[bemildred]

16. . nt