Ukraine leader reports 'de-escalation' in fighting with separatists

Clare Byrne, Oleksandr Savochenko
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Ukrainian soldiers man a position on the front line near the small eastern Ukrainian city of Kurakhove on March 11, 2015

Ukrainian soldiers man a position on the front line near the small eastern Ukrainian city of Kurakhove on March 11, 2015 (AFP Photo/Sergei Supinsky)

Kiev (AFP) - Ukrainian President Petro Poroshenko reported Friday a "gradual de-escalation" in the conflict between government forces and pro-Russian separatists in the country's east as Kiev received the first tranche in a multi-billion-dollar IMF bailout.

Speaking on Ukraine's private 1+1 television network Poroshenko said: "The fact that we have not had military losses for several days ... this is a clear indication of a gradual de-escalation."

Poroshenko's assessment echoed that of a European monitoring mission, which said Thursday that the February 12 truce was "broadly" holding up, despite sporadic clashes in a handful of flashpoints.

Poroshenko cited two zones as still being particularly tense: the area around the bombed-out airport of the rebel hub of Donetsk and the village of Shyrokyne, about 10 kilometres east of the strategic port of Mariupol, which remains in government hands.

But he expressed confidence that Western powers would come to the table with the arms Ukraine has in vain been demanding in the event of a major violation of the peace deal.

"If there is a new upsurge in the aggression against Ukraine, I can say with certainty that we will immediately receive lethal weapons and a new wave of sanctions against the aggressor. We will act in a tough and concerted fashion," he said.

On Wednesday the US announced plans to equip Kiev with 230 Humvee vehicles, unarmed drones, radars and other equipment worth $75 million -- but stopped short at lethal aid.

Despite the lull in fighting the US also expanded its sanctions over the conflict, adding a Russian bank and separatist officials in eastern Ukraine to the list -- a move Moscow branded a "political provocation".

The US show of support came on the same day the International Monetary Fund confirmed a $17.5-billion aid package to Ukraine to shore up its ailing economy.

Ukraine's finance ministry said Friday it had already received the first $5 billion tranche.

The finance ministry said that $2.2 billion would go straight to government coffers with the remaining $2.8 billion going to the central bank, which is battling to shore up the battered national currency, the hyrvnia.

A second $5 billion tranche is expected later in the year.

The aid is seen as crucial to help Ukraine stay afloat while fighting the insurgency that Kiev and the West accuse Russia of supporting with heavy weapons and thousands of troops.

Russia denies the allegations, saying any Russian forces engaged in the fight are soldiers on leave acting in a voluntary capacity.

The past three weeks has seen a significant easing in the violence, as the warring parties withdraw most of their artillery from the frontline, in line with the Minsk accord.

Poroshenko claimed the state had met all its obligations on the arms pullback but emphasised the army was not dropping its guard.

"We are using this time to restore our damaged hardware," he said, adding that troops were planting mines in areas vulnerable to tank attacks.

The rebellion began in April 2014, when separatists emboldened by Russia's annexation of the Crimea peninsula seized control of government buildings in the mostly Russian-speaking Donbas region.

The ensuing conflict has killed over 6,000 people, displaced over 1 million and wrecked industry in the eastern industrial heartland, plunging Ukraine into a deep recession.

In return for its bailout the IMF demanded the government cut spending on pensions and energy subsidies and begin talks with creditors on restructuring its debt.

The IMF has forecast the country's debt-to-GDP ratio to hit 94 percent this year, up from 40.6 percent in 2013.

Finance Minister Natalie Jaresko has until June to reach a debt deal with bondholders including arch-foe Moscow, which holds $3 billion in Ukrainian bonds.

The minister has not said what kind of restructuring Kiev would push for -- whether Ukraine will ask creditors to write off part of the debt or merely reschedule the loans.

Investment Capital Ukraine (ICU) economist Oleksandr Valchyshen said he doubted that Russia would agree to provide Ukraine with any relief.

"Probably they would try to block it," he said.