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26 Feb, 2015 15:13

Donbas blames Kiev ‘economic blockade’ for multi-currency introduction

Donbas blames Kiev ‘economic blockade’ for multi-currency introduction

The people’s republics of Donetsk and Lugansk will introduce a multi-currency financial system using the US dollar, euro and yuan. This is to shield against the free fall of the domestic currency, the hryvnia, and the “economic blockade” by Kiev.

"As Ukraine is not going to lift the economic blockade as agreed, as the Ukrainian currency has depreciated to such an extent that large city stores are becoming sold out, I inform you that we decided to launch a multi-currency system in our country,” said Igor Plotnitsky, head of self-proclaimed People’s Republic of Lugansk, as quoted by TASS. “We will use the ruble, the hryvnia, the dollar and other currencies convenient for us."

The Ukrainian hryvnia has lost about 75 percent of its value since the crisis started a year ago, and on Thursday is trading around 33 to the US dollar.

Screenshot from bloomberg.com

Plotnitsky said this will be a “temporary measure”until it becomes clear whether the republic will use the hryvnia in future, or look for other options.

The self-proclaimed Republic of Donetsk has already put several foreign currencies into circulation.

"We allow several currencies – dollars, as well as euro and Chinese yuan,” said the Donetsk Republic envoy Denis Pushilin at a news conference. He said printing their own currency is a very expensive process and it’s not worth it at present.

"This is a very expensive, long-term project. It is important to understand what it will be supported with. We have enough serious threats that don’t let us consider the question [of printing own currency – Ed.] right now,” he said.

Pushilin accused Kiev of strengthening the economic blockade, saying there is now way to get goods other than via humanitarian aid. He also blamed Kiev for impeding supplies of normally priced medicine.

READ MORE: Kiev introduces rationing, as falling hryvnia causes shopping binge

Despite the tense economic situation in the region, the self-proclaimed Donetsk Republic isn’t going to be always dependent on humanitarian assistance, Pushilin added.

"We’ve got economic potential. The enterprises on our territory have this potential. We’ve already declared the mechanism of getting out of the difficult economic situation,” he said suggesting that Russian businesses build ties with Donetsk industry.

The head of the Donetsk Republic Aleksandr Zakharchenko will supervise pricing policies in the region.

"Zakharchenko will take over the control of the food basket and the state’s pricing policy in connection with the collapse of the hryvnia,” said the head of the Donetsk administration Maxim Leshtchenko, adding that the republic considering settling payments with Russia in rubles.