05/02/2015 Ukraine: Daily Highlights - A big diplomacy day in Ukraine - the US Secretary of State, the German Chancellor and the French President visit Kiev

05/02/2015 Daily Highlights by "Digests & Analytics - Ukraine" News Agency

Topics of the day 

A big diplomacy day in Ukraine - the US Secretary of State, the German Chancellor and the French President visit Kiev. The National Bank’s interest rate rose to a record 19.5% value, the hryvnia (UAH) was released into free float.

Key Events In Ukraine

• After talks in Kiev with President Poroshenko the US Secretary of State Kerry said that Washington hopes for a diplomatic solution to the conflict in Ukraine, but the US is not turning a blind eye to Russia's aggression. The withdrawal of heavy weapons, Russian military units and mercenaries from the territory of Ukraine is the only way for Russia to avoid international isolation. The Prime Minister Yatsenyuk said that Ukraine is not conidering any proposals to end the war that would lead to violation of the sovereignty and the territorial integrity of the country. Kerry stressed that one condition for reaching peace in Donbass must be the strong commitment from the  insurgents to implement all Minsk Agreement’s accords.
  During the tripartite talks the leaders of Ukraine, France and Germany have developed joint proposals for Donbass that President Hollande and the German Chancellor Merkel will present to the Russian President Putin. They include an immediate ceasefire, the withdrawal of heavy equipment and weapons, the withdrawal of troops and the release of all hostages. A separate issue is the release of MP Ms Savchenko, who is held in prison in Russia.
• President Poroshenko signed a law that increases the draft age to 27 years, makes evading military service by officers a criminal offense, expands the list of professional categories for people who can serve on a contract, reduces the number of grounds for deferral from military service and increases the social protection for servicemen.
• A bill depriving deputies and judges of immunity is sent to the Constitutional Court to verify its compliance with the Constitution. The law could come into force starting September 2015. At present, deputies and judges can be deprived of immunity by the decision of the Verkhovna Rada on request by General Prosecutor's Office.
• The Verkhovna Rada deputies agreed to initiate criminal proceedings against judge Kireyev who was responsible for issuing the guilty sentence to the leader of the "Fatherland" party Tymoshenko on the false pretenses.
• In the first reading, MP adopted a law to reform the Ministry of Interior, submitted by the Vice Minister Zghuladze, that would lead to creation of American-style unified police force.
• MPs passed the law on the protection of the information space that specifically forbids Russian films and TV serials glorifying the armed and seurity forces of the aggressor; it also includes sanctions against those broadcasters that break this law. On advice from studio “1 + 1”, the State Movie Agency prohibited 20 Russian propaganda films and serials. This list will be expanded in the near future .
• The number of applicants for the position of the head of the Anti-Corruption Bureau has risen to 96.

• The National Bank raises interest rates from 14% to 19.5% per annum starting February 6 with a corresponding adjustment to interest rates on active and passive operations of the bank in attempt to reduce inflation risks and uncertainties because of the situation in the east of the country.
  The National Bank plans to drop GDP in 2015 by 4.5%.
  The share of foreign capital in authorized capital of Ukrainian banks decreased by 1.5%, but the number of banks with 100% foreign capital remained the same.
  The head of the NBU Gontareva plans to sign a memorandum with the IMF on February 6-7. After talks with the US Secretary of State Kerry, President Poroshenko announced the readiness of the US to extend financial assistance to Ukraine and replace the existing stabilization loan (stand-by) with extended credit programme (Extended Fund Facility) for up to 7 years in the amount of $ 30 billion.
  The Ukraine's foreign exchange reserves in January decreased by 15%, down to $ 6.4 billion. In January, "Naftogaz" received $ 0.5 billion  from the reserves of NBU as a prepayment to  "Gazprom" for gas.
  The NBU stops conducting daily currency exchange auctions and withdraws from course indices, which will be established on the basis of market parameters of supply and demand. The official rate of hryvnia against the dollar immediately dropped sharply: 18.00 UAH / USD (+1.27 UAH), 20.60 UAH / EUR (+1,57 UAH), 2.75 UAH / 10 RUR (+0 26 UAH). The rate on the interbank market reached 22 UAH/USD value.

Ukraine at War

• The situation in the Debaltseve foothold and Uglegorsk remains tense; battles continue along the whole front  line from the village of Luganskaya to  Mariupol.
• A number of towns and villages including Sartana, Schastya, Popasna, Stanitsa Luhans'ka, Debaltseve, Dzerzhins'k were subjected to heavy shelling . Trains ressuplying insurgents with ammunition from Russia were spotted in Illovais'k.  To demoralize the population, rebels continue indiscriminate fire in Donets'k from all kinds of artillery and MLRS.  There are numerous casualties among the civilian population.
• DNR gunmen seized the Donets'k office of mobile operator "Kyivstar", and all communications equipment there, and announced the creation of their own cellular communication network.
  Mobile operators MTS and Life :) said that they continue operations in the combat zone.
• The OSCE Mission in Donbas will increase to 500 people by  the end of February.

Ukraine and the World

• The NATO Secretary General Stoltenberg said that the Alliance is going to increase the size of a rapid reaction force of up to 30 thousand people in response to the Russian aggression against Ukraine.
• As reported by Reuters, the French president Hollande does not  support Ukraine's accession to NATO.
• In connection with the proposed contract to supply Russian arms to Iran, the United States included four additional Russian defense manufacturers in the sanctions list. The US companies are prohibited to provide them with any products and technologies.
• President Putin signed a decree on conscription of reservists for two-month military training.
• The Rating agency Moody's downgraded Russia's sovereign rating to "negative" Baa3 because of continuing  deterioration of Russian economy and the Western sanctions.

Trends

• Under the pressure from the members of Congress and senators from the two major parties, President Obama might take a decision to grant lethal defensive weapons to Ukraine. The NATO Secretary General said that individual members of the Alliance may supply weapons to Ukraine in the framework of their bilateral agreements.
• The procedure created to control admission to the zone occupied by DNR and LNR rebels became a corruption scheme to obtain passes and permits  and does not allow Ukrainian citizens to implement their basic constitutional right to free movement.
• Depreciation of hryvnia is directly tied up to the sharp decline in exports and commodity prices, which affected the total amount of export earnings. Expensive imports could help hryvnia, but in this case, export-oriented enterprises that use imported raw materials could stop production.
• Despite warnings from the government and Parliament's declaration to recognize Russia as an aggressor, almost all law enforcement agencies in Ukraine continue to use electronic services that are directly linked to Russia.
  
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