Ukraine rebels pay pensioners in dollars

Donetsk (Ukraine) (AFP) - Ukraine's pro-Russian rebels in battle-scarred Donetsk said Friday they had started paying dollars to pensioners who have been cut off from Kiev's social benefits despite serving valiantly in Soviet-era wars.

But the announcement raised immediate questions about where the separatist government -- cut off from Ukrainian banks and claiming no Russian assistance -- was getting the hard currency and how widespread the programme actually was.

The insurgents themselves gave contradictory accounts for their sudden source of foreign wealth.

The Donetsk rebel parliament's speaker called the decision "temporary" and affecting only war veterans who had reached retirement age.

"When we introduced the dual currency system (at the start of the year), we decided to accept municipal service and tax payments in dollars," Andrei Purgin told AFP by telephone.

"Some people started paying in dollars and our central bank began accumulating hard currency. Now our bank is paying it out."

Purgin's account contradicts interviews conducted by AFP showing locals treasuring their dollars because of its relative strength against Ukrainian hryvnias and Russian rubles used by some in the war zone.

But the region's self-proclaimed deputy finance minister offered a different account.

"The republic's industry has shifted its focus on Russia," Oksana Taran told reporters in Donetsk -- the insurgents' de facto capital and central city in a province famous for its gigantic steel mills and plentiful coal mines.

"So its only natural that our republic started receiving rubles and dollars. Russia's payments came in these currencies," she said.

Russia does not officially import Donetsk coal and steel products. And it categorically rejects either funding or arming the militia governments or fighters.

Taran did not explain the sort of trade involved. And Purgin failed to spell out why the dollar payments were only temporary or when they might be phased out.

But the handful of dressed-up elderly that lined up for their greenbacks Friday morning did so before a bank of Russian state TV cameras -- present in force whenever a Kremlin public relations campaign was involved.

- Public relations war -

Kiev's pro-Western authorities in November controversially stopped paying social benefits to the residents of regions overseen by pro-Russian gunmen -- a decision that provoked an uproar in Moscow.

Ukrainian President Petro Poroshenko said the decision was difficult but necessary because the fighters were pilfering money sent from Kiev and using it to fund their campaign.

Militants have overtaken regional government agencies that Kiev was using to distribute various benefit payments. Ukrainian banks had also shut down their regional branches as a precaution that month.

The Kremlin accused Poroshenko of human rights violations and even war crimes -- a charge that received some support from pro-Moscow right-wing parties in Europe.

Russian state television has since worked hard to paint a picture of local adoration of insurgency leaders who were looking after citizens abandoned by the Kiev authorities.

"The pensioners eagerly started using this service," a reporter from Moscow's Life News -- a TV channel and website linked closely to Russia's state security service -- said in a live broadcast from Donetsk.

"I received my pension for June," a sharply-dressed man who identified himself as Mikhail told the channel.

"I travel to Russia a lot," Mikhail said.

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