Ukraine In Dire Financial Straits

by: Acting Man

Ukrainian Hryvnia Crashes

Bank runs, lack of reserves, danger of default - these were the sound bites lately emanating from the post-revolutionary Ukraine. Amid reports of intensifying bank runs during which some 7% of all bank deposits have reportedly been withdrawn, Russia let it be known that it believes the Ukraine is on the brink of default. This has some weight, as Russia was poised to extend an emergency loan amounting to $15 billion to the Ukraine.

Shortly after the government of former president Yanukovich and the opposition had agreed on a truce and just prior to the confrontation on Maidan square turning bloody, Russia had announced it would release a $2 billion tranche of the loan. One assumes that the Russians are well informed about the Ukraine's financial condition. Moreover, the new interim government already let it be known that it needs at least $35 billion in aid.

For more details on these developments see this write-up on the situation by Mish. On Monday we pointed out that the hryvnia had oddly failed to appreciate in spite of a sudden urge by investors to load up on Ukrainian stocks and bonds. Later on Monday, the currency started to move lower quite quickly. Come Tuesday, and the currency has basically crashed (and the move may not be over yet).


The Ukrainian hryvnia crashes

The monthly chart provides some further perspective:

Hryvnia monthly

The Ukrainian hryvnia monthly. One thing is certain, the revolution wasn't good for the currency …

From the Bloomberg report linked to above:

"The markets are much too bullish now regarding Ukrainian risk assets,"Michael Ganske, the head of emerging markets at Rogge Global Partners Plc in London, said by e-mail today. "I see the hryvnia going down further" to 12 versus the dollar.

The central bank has eased its grip on the hryvnia as it contends with slumping foreign-exchange reserves, which tumbled 28 percent in the year through January to $17.8 billion, the lowest level since 2006."

(emphasis added)

As an aside, readers may recall that we have previously discussed the considerable role played by extreme right wing elements in the Ukrainian revolution. We found it quite interesting in this context that following the ouster of Yanukovich and the success of the revolution, Ukrainian Rabbi Moshe Reuven Azman asked Jews living in Kiev to leave the city and even the country. According to a report in the Jewish Press:

"On Friday Ukrainian Rabbi Moshe Reuven Azman asked Kiev Jews to leave the city and, if possible, the country, due to fears that Jews might be targeted in the ongoing chaos. The Israel National News reported Friday that some Jewish shops have been vandalized and other threats to the Jewish community have been received. "I told my congregation to leave the city center or the city all together and if possible the country too…I don't want to tempt fate…but there are constant warnings concerning intentions to attack Jewish institutions," Rabbi Azman told Maariv.


"We contacted (Israeli) Foreign Minister Avigdor Lieberman requesting he assist us with securing the community," said Edward Dolinsky, head of the umbrella organization of Ukraine's Jews."

(emphasis added)

Due to coming across this information, we will soon take another look at the side of the revolution the Western press is continually glossing over as if it didn't exist. After all, there is every reason to believe that Rabbi Azman knows whereof he speaks.

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