News that Hollande and Merkel are travelling to Moscow confirms what previous reports suggested -- that a major diplomatic initiative to end the Ukrainian conflict is underway.
Ukraine’s economic situation is in freefall. The dwindling level of the Central Bank’s foreign currency reserves has forced Ukraine to float its currency, the hryvnia, which in consequence lost almost a third of its value in the space of a single day.
The collapse of the hryvnia presents far greater problems to Ukraine than the devaluation of the rouble does to Russia.
Unlike Russia Ukraine has practically run through its foreign currency reserves, which have fallen to the level where they can cover the cost of just a few weeks’ imports.
Unlike Russia Ukraine is heavily in debt and lacks money to pay its debts or support its banks. The collapse of the hryvnia is going to make payment of these debts almost impossible.
Since the IMF is now threatening to cut off funding and since alternative sources of funding from the Western states have failed to materialise, the prospect of default and of the collapse of the currency and of the banking system is becoming very real.
To the extent that the Ukrainian economy functions at all it does so because of gas, coal and electricity supplied by Russia.
As the economy disintegrates the military situation approaches crisis. Brave talk of just a few weeks ago about how the Ukrainian military had supposedly fully recovered from the disaster of the summer has proved to be untrue.
Donetsk airport has been lost with heavy losses. Latest reports say the Debaltsevo pocket is now sealed with thousands of troops cut off.