The ceasefire agreement signed in Minsk on 12 February 2014 was due to come into force on 15 February. However, it didn’t prevent fighting in Debaltseve which was captured by the rebels after 15 February. It appears now that the ceasefire is slowly being implemented even if Kiev has accused the separatists of building up forces close to Mariupol. This strategic port could become the next battlefront. Any separatist attack in the direction of Mariupol is likely to result in additional (severe?) sanctions on Russia. Currently, the US and EU are discussing imposing further sanctions on Russia as the country undermines the ceasefire agreed upon on 12 February.

Impact on country risk

Amid fighting in eastern Ukraine, economic difficulties continue in Ukraine. The IMF announced a 4-year Extended Fund Facility of around USD 17.5bn as well as additional resources from the international community pending approval of the IMF Executive Board. This announcement didn’t prevent large currency depreciation. After having depreciated by nearly 50% in 2014, the Hryvnia plunged by more than 40% compared to its level on 1 January 2015 (cf. graph). In order to stem currency depreciation, the central bank announced additional harsh currency controls (banning most currency trading) before reversing it hours later. In the meantime, Moscow threatened to stop gas deliveries to Ukraine as the country failed to make pre- payment, an allegation denied by the Ukrainian authorities but which didn’t prevent the state gas company, Naftogaz, to pay USD 15mio to Gazprom. All in all, the economic situation is far from improving. This could spur social unrest. In this context, an international support (from the IMF and other bilateral and multilateral institutions) is key to stabilise the economy. Prospects to reopen cover for Ukraine remain meagre.


Analyst: Pascaline della Faille, p.dellafaille@credendogroup.com