Ukraine’s central bank cancelled the currency auctions today that had previously kept its currency, the hryvna, at a peg. And here is what happened next:
All told, the currency dropped by more than 30 percent from Wednesday’s close. Reuters is reporting that Ukraine’s foreign reserves stood at $6.4 billion before the drop in currency, barely enough to cover five weeks of imports.Ukraine is taking a huge beating on both the battlefield and in the financial markets. From Kiev’s point of view, this is the worst possible backdrop for the surprise talks that are to take place in Moscow tomorrow between Vladimir Putin, Angela Merkel, and Francois Hollande. When Putin says to the Western leaders that Ukraine is toast, what exactly are they going to say back to him?Lots of people in DC have begun talking about sending weapons to Ukraine, and we don’t have any pincipled objections to that. On the contrary, we would like victims of Russian aggression to have help in defending themselves. However, what Ukraine—and its partners in the West—really need is a strategy. This would have to be a state-building strategy as well as a war-fighting strategy, and it would mean a substantial and long term financial commitment to Ukraine.Clearly President Obama wants nothing of the kind and under his leadership Washington is likely to undercut any aid that political expediency forces it to offer in much the same way D.C. footdragging and pettyfogging ensured that aid to the Syrian rebels was always too little and too late to make any difference.