Ukraine separatists threaten to introduce ruble as Kyiv ignores autonomy deadline

By bne IntelliNews March 13, 2015

bne IntelliNews -


The self-proclaimed leaders of the East Ukraine separatist entities Donetsk People's Republic (DPR) and Luhansk People's Republic (LPR) have called on Germany and France to put pressure on the Kyiv government because of its "failure" to implement the peace accord signed in Minsk on February 12.

The Russian-backed rebels also said the ill effects of an "economic blockade" of their region by Kyiv contravenes the Minsk agreements, and may cause them to use the ruble alongside the hryvnia as legal tender, thereby strengthening ties to Russia.

Under the peace agreement, Ukraine's parliament has to pass a resolution by March 14 listing territories in East Ukraine to be given special autonomy status, allowing them to be run by the separatist authorities, their leaders claim.

In the cited "complex of measures", an annex to the peace accord signed in Minsk on February 12 by France, Germany, Ukraine and Russia, Ukraine undertook to award such special status to these districts in its eastern Donetsk and Luhansk regions. But Ukraine is not yet showing any signs of doing so, the rebels say.

“We are forced to appeal to you [France and Germany] as guarantors of the Minsk agreements with the request to exert pressure on Ukraine up to and including the introduction of personal and economic sanctions, to force its leadership to implement the complex of measures confirmed by the contact group on February 12,” said the joint appeal. It was signed by DPR leader Aleksandr Zakharchenko and his counterpart in LPR Igor Plotnitsky.

The Verkhovna Rada (Ukrainian Parliament) had not even begun formal considerations of the demands for autonomy rights for the two regions, the document maintains. “This is despite the fact that the 30 days set aside for implementing this decision according to the 'road map' laid out in the complex of measures for implementing the Minsk agreement will expire tomorrow, March 14,” it added.

Ukraine originally passed a law on "special order for individual districts in Donest and Luhansk regions" on September 16, after an initial ceasefire agreement was reached in Minsk between the warring parties on September 5. 

Move to the ruble?

Stressing that the Russian ruble could be introduced in retaliation for the Kyiv's alleged economic blockade, the rebel leaders invoked earlier international offers to help the war-torn east recover.

“Germany and France promised to help in rebuilding the bank infrastructure in our region. But Kyiv, on one hand, refuses your assistance, and on the other – has failed to undertake anything itself to ensure the banking system in our republic restarted work," the appeal continued.

Zakharchenko and Plotnitsky acknowledged the disastrous economic state of the territories they control, blaming it squarely on the blockade and Kyiv's "military aggression".

“Our republics' [Donestk and Luhansk] economy is on the verge of collapse, pensions and other social benefits are not being paid, and there is such a deficit of hryvnia that citizens and small business are already conducting transactions in euro, dollars and rubles,” they said. 

The appeal called upon France and Germany to send specialists to revive the banking system on their territories, and to introduce sanctions against Ukraine for violating the peace deal. 

Separately, the DPR's deputy head of finance Oksana Tarana told a press conference that because of the deficit of hryvnia, the region would allow use of the ruble, dollar and euro alongside the hryvnia as legal tender. She also said that an experimental system of wire money transfers to and from the members of the Commonwealth of Independent States would be introduced in the week starting March 16. Luhansk region officials this week said the same.

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