Ukraine's Economy Collapsing

Ukraine ’s central bank said it has banned banks from buying foreign currency for their clients until the end of the week, as businesses attempt to move their cash out of the Ukrainian currency, the hryvnia. Specifically, the National Bank introduced a three-day ban on foreign-exchange purchases by companies through banks, and limited the banks’ purchases to 0.5% of their capital.

Hours after the measure was announced, Prime Minister Arseniy Yatsenyuk called for an emergency session of parliament to pass economic and financial measures designed to secure financing from the International Monetary Fund.

Yatsenyuk slammed the central bank for making the decision “without any consultation,” saying that he’d found out about the measure from the Internet. “It clearly doesn’t add to the stability of the national currency that the National Bank is responsible for,” he said.

The Ukranian currency has already lost more than  half its value, relative to the dollar, since the start of the year.

On another front in the country's deteriorating economic situation, Russian President Vladimir Putin warned Moscow may halt natural gas supplies.

Earlier this week, Russian state gas company OAO Gazprom warned that supplies to the EU were at “serious risk,” after it said Ukraine had failed to make a payment for new shipments. Gazprom said that the remaining volumes that have already been prepaid would last for just two days.

The EU is trying to convene a three-way meeting with the Ukrainian and Russian energy ministers to resolve the conflict.

This is going to be one expensive mistress that the US has decided to jump into bed with.

 --RW

(reports via WSJ,  chart via XE.com)