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A shopper wearing a protective face mask stands inside a shop on the first day after ending a coronavirus lockdown in Kyiv, Ukraine January 25, 2021. REUTERS/Gleb Garanich

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KYIV, Jan 20 (Reuters) - Ukraine's central bank raised its main interest rate to 10% from 9% on Thursday, crossing into double digits for the first time since April 2020, to try to tackle persistently high inflation and the economic fallout from a standoff with Russia.

The National Bank of Ukraine (NBU) said it could hike rates again at its next policy meeting in March and signalled that monetary conditions would remain moderately tight. It would also increase banks' reserve requirements next month.

Ukrainian assets and its hryvnia currency have been pounded by weeks of tensions as Russia massed tens of thousands of troops near Ukraine's borders and talks between the West and Russia failed to produce a breakthrough.

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The risk of conflict comes with Ukraine's central bank already grappling with inflation that hit double digits last year on higher energy and food prices, and prompted five rate rises in 2021.

"As many of the pro-inflationary risks have materialised, tighter monetary policy is needed in order to improve inflation expectations and ensure steady disinflation toward the target of 5%," the central bank said in a statement.

It raised rates five times last year as inflation spiked to the highest level since 2018, reaching 10% in December.

Analysts polled by Reuters had predicted the central bank would raise its key interest rate to 9.5%-10.0% to tackle worsening inflation expectations and a weakening hryvnia due to fears of a Russian military offensive. read more

The central bank also raised its inflation forecast for 2022 to 7.7% from 5.0% and warned that inflation would only ease back into its target range of 5% in 2023.

The hryvnia has weakened more than 4% against the dollar since the start of 2022 despite the central bank selling $752 million from early January to smooth volatility on the domestic foreign exchange market.

However, the NBU said it had no plans to introduce a ban on capital withdrawals.

"Our forecast envisages that the next increase will take place in March, but we always give a disclaimer that this is a forecast, and not an obligation of the National Bank," Deputy Governor Sergiy Nikolaychuk told a briefing.

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Writing by Matthias Williams, Editing by Timothy Heritage and Toby Chopra

Our Standards: The Thomson Reuters Trust Principles.

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Ukraine raises rate to 10% as inflation and Russia standoff weigh - Reuters

American Kurt Groszhans is seen in an undated profile photo from his Facebook page. Facebook/Kurt Groszhans

After almost two months behind bars in Ukraine, a North Dakota farmer stood before a panel of three judges last week who ruled that he should remain in detention before a trial begins in which he will have to defend himself against allegations that he tried to arrange the assassination of the country's agriculture minister, one of his attorneys told CBS News.

Kurt Groszhans, from Ashley, North Dakota, is facing several charges, including attempted murder, attempted extortion and attempted kidnapping. He denies all the charges against him, according to lawyer Pavel Ustimenko. The charges were filed by the National Police of Ukraine. If convicted, Groszhans could be sentenced to life in prison, though Ustimenko said a sentence between 12 and 15 years was more likely.

Groszhans moved to Ukraine in 2017,reportedlyto explore his family heritage and, as he wrote in an August 30, 2021blog post, to invest in Ukraine's agro-industrial sector. He wrote that he hired a man named Roman Leshchenko to manage his farming business in the country, but that from day four, Leshchenko "began to withdraw my working capital and use my seeds on his lands."

Groszhans also claimed that Leshchenko later made a large contribution to the political party led by Volodymyr Zelenskyy, who went on to become Ukraine's president. In 2020, Zelenzkyy appointed Leshchenko to be the country's Minister of Agrarian Policy and Food.

Calling himself "a deceived American investor," Groszhans wrote bluntly: "Roman Nikolaevich Leshchenko deceived me. And I have been suing him for several years."

The American claimed that judges delayed his lawsuits, explaining that he "should understand who you are suing."

Leshchenko's lawyer, Tetyana Kozachenko, told CBS News that the funds lent to him by Groszhans were "returned in full," and that the dispute was related to "business transactions."

Groszhans' attorney, however, said his client wanted more than the return of $250,000 in cash that was taken he was also seeking to cover the costs of "soy beans, corn, use of machinery" and legal fees totaling around $1 million.

Groszhans was arrested on November 18, 2021, his attorney told CBS News. Ustimenko said the police claimed to have recordings of Groszhans' then-assistant, a Ukrainian woman named Olena Bogach, meeting with "other people" who appeared to be police informants, discussing "how to get money from Mr. Leshchenko and along with that, other very strange things, discussing kidnapping how to do something with him."According to Ustimenko, however, Groszhans was rarely present during those conversations and even when he was, he could hardly speak Russian or Ukrainian, so without receiving the alleged audio files, Groszhans and his legal team couldn't "know what exactly was translated to him," or what prosecutors claimed he had said in those meetings.

Ustimenko said Groszhans was drawn into the conversations with Bogach and other Ukrainians by promises of help to "find decent land for farming" in the country.

According to Ustimenko, Groszhans said that while he was visiting the restaurant where the final meeting took place on November 17, "he was poisoned with psychotropic substances" and couldn't understand where he was or what was happening. He didn't even remember leaving the restaurant, his lawyer said.

Groszhans' legal team said investigators had denied their request to test his blood samples.

"I believe this is all a set-up," Ustimenko said. "Not only does Kurt deny the charges, but there is no proof of any crime in the material that police gave us."He noted that Bogach, Groszhans' former assistant, is also now in detention, accused of trying to hire a hitman to kill Leshchenko.

CBS News sought comment from Bogach's attorney for this story, but there was no response after one week.

"What happened is a shocking situation for me. But I want to say this: If someone thinks that the threats, assassination, blackmail or physical removal of the Minister of Agrarian Policy will allow him to avoid legal responsibility, then I can assure you that it is not the case," Leshchenko told CBS News partner network BBC News.

Groszhans' conditions in prison are "relatively okay," and he has been visited at least three times by staff from the U.S. Embassy, Ustimenko said. On January 5, a Ukrainiandistrict court denied a motion to transfer Groszhans to house arrest, his lawyer said.In a statement to CBS News, a State Department official confirmed that the U.S. was "aware of the detention of a U.S. citizen in Ukraine," and said it would "press for fair treatment and due process."

Groszhans' sisters, Kristi Magnusson and Kimberly Groszhans, declined to comment for this article, but they havereportedly said they don't believe the charges against him. The family launched a crowdfunding webpage in November to raise money for his legal defense.

The court ruled last Thursday that Groszhans must remain in prison until the next scheduled hearing on February 13. Ustimenko said he hoped to receive a transcript from investigators before that hearing of Groszhan's remarks during the restaurant meeting with undercover police.

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American farmer Kurt Groszhans accused of plotting kidnap and assassination of Ukrainian government minister - CBS News

Growing tensions between Moscow and Western powers have raised the prospect of new sanctions being imposed on Russia, possibly the most severe yet, if it attacks neighboring Ukraine.

U.S. Senate Democrats have unveiled a bill to impose sweeping sanctions on the Russian government and military officials including President Vladimir Putin as well as Russian banking institutions if Moscow engages in hostilities against Ukraine.

If Russia is using its conventional military to acquire land in Ukraine, that will meet a severe economic response, a senior White House official said on Wednesday.

Russia has massed tens of thousands of troops near Ukraines borders in what Kyiv and its allies fear could be preparation for a new military offensive.

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Russia, which denies planning to attack Ukraine, has been subject to sanctions since its 2014 annexation of Crimea from its neighbor. Further punitive measures were added after a former Russian spy was poisoned in Britain in 2018 and following an investigation into alleged Russian meddling in the 2016 U.S. presidential election won by Donald Trump.

Russia has denied any role in the poisoning of ex-spy Yuri Skripal and his daughter, and denies trying to interfere in foreign elections.

Here are some ways financial sanctions could target Russia.

Sanctions could target semiconductor chips

The White House has told the U.S. chip industry to be prepared for new restrictions on exports to Russia if Moscow attacks Ukraine, sources said.

This includes potentially blocking the countrys access to global electronics supplies.

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Similar measures were deployed during the Cold War, when the United States and other Western nations maintained severe technology sanctions on the Soviet Union, keeping it technologically backward and crimping growth.

Sanctions could hit Russia's big banks, assets

The United States and the European Union already have sanctions on Russias energy, financial and defense sectors.

The White House is floating the idea of curbs on Russias biggest banks and has previously mooted measures targeting Moscows ability to convert roubles into dollars and other currencies. Washington could also target the state-backed Russian Direct Investment Fund.

Sanctions applied to individual firms often cause sector-wide pain, according to former U.S. State Department economist Mark Stone, as they make investors worry that the curbs will be widened or that they will be unable to differentiate.

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Sanctioning all transactions with Russian banks and freezing assets would be more impactful and more targeted than a cut-off from the SWIFT global messaging system, said Brian OToole, a fellow at the Atlantic Council think tank.

Targeting Russias access to SWIFT, which is widely used in international financial transactions, would become useful really only following broad financial sanctions by the United States, Britain and the European Union, OToole said.

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Sanctions could zero in on individuals with bans, freezes

Sanctioning individuals via asset freezes and travel bans is a commonly used tool and can sometimes resonate widely.

Britain imposed sanctions in April 2021 on 14 Russians under a new law giving the UK government the power to penalize those it says are credibly involved in the most serious corruption abroad.

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The bill unveiled last week by Senate Democrats foresees sweeping sanctions on top Russian government and military officials, including Putin.

Kremlins spokesman Dmitry Peskov said the idea of imposing sanctions on the Russian president would be tantamount to severing relations between Moscow and Washington.

Sanctions could target access to SWIFT

One of the harshest measures would be to disconnect the Russian financial system from SWIFT.

SWIFT, used by more than 11,000 financial institutions in over 200 countries, is a Belgium-based cooperative governed by a 25-member board, including Eddie Astanin, chairman of Russias Central Counterparty Clearing Centre (NCC).

There is a precedent: In March 2012, SWIFT disconnected Iranian banks as international sanctions tightened against Tehran over its nuclear program a move that saw the country lose half its oil export revenues and 30 per cent of foreign trade, according to think tank Carnegie Moscow Center.

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Irans economy is smaller and not as linked-up internationally as the Russian economy, whose interconnectedness with the West has worked as a shield.

The United States and Germany would stand to lose the most, as their banks are the most frequent SWIFT users with Russian banks, according to Maria Shagina at the Carnegie Moscow Center.

Calls to cut Russias SWIFT access were mooted in 2014 when Moscow annexed Crimea, prompting Moscow to develop an alternative messaging system, SPFS.

The number of messages sent via SPFS reached around 2 million, or one-fifth of Russian internal traffic, in 2020, according to the central bank, which aims to increase this to 30 per cent in 2023. However, the SPFS system, which has size limits on messages and is operational only on weekdays, has had a hard time picking up foreign members, Shagina wrote in a 2021 paper.

The Atlantic Councils OToole said cutting Russia off from SWIFT would cause immediate disruption but the impact would diminish over time.

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Some payments would be delayed and there may be increased cost in making new ones, but broadly speaking there is unlikely to be a massive collapse of Russian trade so long as that trade remains legal/not sanctioned, OToole said.

Russian bonds may also face curbs

Access to Russian bonds has become increasingly restricted and curbs could be tightened further, with a ban on secondary market participation floated as one option.

In April 2021, U.S. President Joe Biden banned U.S. investors buying new Russian rouble bonds OFZs as they are known over accusations of election meddling.

Sanctions imposed in 2015 made future Russian dollar debt ineligible for many investors and indexes such as JPMorgans EMBI Global.

Those measures have cut Russias external debt by 33 per cent since early 2014 from $733 billion to $489 billion in the third quarter of 2021.

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Lower debt improves a countrys balance sheet on the surface, but deprives it of financing sources that could contribute to economic growth and development.

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Russia is facing severe sanctions for Ukraine threats. Heres what that could mean - Globalnews.ca

By stepping up its military presence along the Ukrainian border, Russian President Vladimir Putin hopes that Ukraine and the West will make concessions and Ukraine will realign itself back to Moscow, says Stanford scholar Steven Pifer. But nothing has alienated Ukraine more than Kremlin policy over the past eight years, particularly Russias military seizure of Crimea in 2014 and its role in the Donbas conflict that has claimed more than 13,000 lives, he said.

Stever Pifer (Image credit: Damian M. Marhefka)

Here, Pifer, the William J. Perry Fellow at Stanfords Center for International Security and Cooperation (CISAC), discusses what Putin hopes to accomplish by amassing military troops along the Ukrainian border and why Ukraines democratic ambitions pose such a threat to Russias authoritarian leader.

Pifers research focuses on nuclear arms control, Ukraine, Russia and European security. Pifer spent more than 25 years working with the U.S. State Department, where he focused on Americas relations with the former Soviet Union and Europe, as well as arms control and security issues. He served as deputy assistant secretary of state in the Bureau of European and Eurasian Affairs with responsibilities for Russia and Ukraine (2001-2004), ambassador to Ukraine (1998-2000), and special assistant to the president and senior director for Russia, Ukraine and Eurasia on the National Security Council (1996-1997).

How likely is it that Putin will start a war with Ukraine?

The short answer: We dont know. It may well be that Mr. Putin has not yet decided. The Kremlin undoubtedly hopes that just the threat of a new attack on Ukraine will prompt Kyiv [the Ukrainian capital city] and the West to make concessions.

I believe the costs to Russia of attacking Ukraine would significantly outweigh the benefits. However, Mr. Putin seems to operate on a different logic, and officials in Washington and European capitals have expressed real alarm about the prospect of Russian military action. Western officials would be wise to assume the worst and do everything they can to try to dissuade the Kremlin from war.

What does Putin hope to achieve by amassing a strong military presence along the Ukrainian border?

Ideally, Mr. Putin wants Kyiv to abandon its Western course and turn back to Moscow. However, nothing has done more to push Ukraine away from Russia and toward the West than Russian policy over the past eight years, in particular, Russias seizure of Crimea and its role in the conflict in Donbas that has claimed more than 13,000 lives. As a result, more and more Ukrainians see membership in institutions such as the European Union and NATO as necessary for their security.

Mr. Putin also wants NATO to rethink policies, such as enlargement and the deployment of relatively small battlegroups on the territory of Poland and the Baltic states. Nothing suggests that NATO will make those changes.

What diplomatic options are available to prevent conflict from escalating further? Biden has warned Russia with economic sanctions should they take any further military action Ukraine. Is this enough of a deterrent?

The Biden administration has responded to the crisis with a mix of deterrence and dialogue. It has spelled out the costs that would ensue if Russia attacks Ukraine punishing new sanctions, more military assistance to Kyiv and a stronger NATO military presence in member states near Russia, to say nothing of the casualties the Ukrainians would inflict on Russian troops. At the same time, the administration has expressed a readiness to discuss Russian concerns, making clear that Western and Ukrainian concerns about Russian behavior must also be addressed.

Mr. Putin has demanded security guarantees for Russia, a bit ironic since Russia has the worlds largest nuclear arsenal and the most powerful conventional military in Europe. In mid-December, the Russian foreign ministry proposed draft NATO-Russia and U.S.-Russia agreements incorporating those demands. Many provisions in those agreements are unacceptable, as the Russian officials who drafted them undoubtedly knew. Other elements could offer a basis for discussion and even negotiation, if Moscow is prepared to address reciprocal concerns.

The big question about the draft agreements: Does the Kremlin regard them as an opening bid in what would be a serious and complex negotiation, or does the Kremlin seek rejection, which it could then add to its list of pretexts for assaulting Ukraine? We dont yet know.

As the former ambassador to Ukraine and a scholar of the region, what do you think leaders in the Kremlin misunderstand about Ukraine, its people and its desire for sovereignty?

Mr. Putin apparently does not understand the desire of Ukrainians to live in a sovereign state and to choose their own course. He regularly refers to Russians and Ukrainians as one people, which is an utterly tone-deaf comment that many Ukrainians hear as a denial of their culture, history and language. The Kremlins lack of understanding is one factor that has resulted in a policy that has produced a major strategic failure for Russia; it has pushed Ukraine away and fueled great animosity there toward the Russian state.

How has Russias military seizure of Crimea transformed diplomatic relations in the region and with the world at large, especially the U.S., the EU and NATO?

Russias illegal seizure of Crimea in 2014 was the biggest land grab in Europe since World War II, and it violated many commitments that Russia had made to respect Ukraines territorial integrity. The Kremlin then provoked and supported, in some cases with regular units of the Russian army, the conflict in Donbas. Those actions had major negative repercussions for Russias relations with the West, and the West reacted. For example, the United States and Europe coordinated on sanctions targeting the Russian economy. NATO, which had drawn down its military power since the early 1990s, reversed course; member states agreed to increase their defense spending, with a target of 2 percent of gross domestic product by 2024. Moreover, NATO began deploying ground forces in member states on its eastern flank.

Next week will see talks between Russian and U.S. officials on Jan. 10, a NATO-Russia convening on Jan. 12, and a meeting of the Organization for Security and Cooperation in Europe (OSCE) on Jan. 13. How do you anticipate discussions about Ukraine unfolding at these events? What would make these discussions successful?

The Russia-Ukraine crisis and broader European security issues will come up in all three meetings. When U.S. officials meet their Russian counterparts, they will undoubtedly discuss these issues but will insist there can be no negotiations about European security or Ukraine without Europeans and Ukrainians at the table. U.S. officials will also make clear that Russia needs to de-escalate the military situation. NATO allies will all be taking part in the meeting with Russian officials on Jan. 12. The Jan. 13 OSCE meeting will be the one in which all relevant parties, particularly the Ukrainians, are present.

Following those meetings, Russian officials should return to Moscow with a good sense for which parts of their draft agreements could provide a basis for negotiation and which are non-starters. That gets back to the big question: Does the Kremlin intend its draft agreements as an opening bid in a negotiating process in which its extreme demands will not be met, or does it want a rejection to add to its narrative for war?

Is there anything else you would like to add?

Moscow has sought to frame this crisis as one between Russia and NATO, but the Kremlins primary focus is Ukraine. This is partly about geopolitics and Moscows desire for a sphere of influence in the post-Soviet space. However, it is also very much about Russian domestic politics. A Ukraine that charts its own course, consolidates its democracy and enacts reforms that realize the full potential of its economy poses a nightmare for the Kremlin: That Ukraine would cause Russians to ask why they cannot have the same political voice as Ukrainian citizens and perhaps even challenge Mr. Putins authoritarianism.

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Understanding the Russia-Ukraine crisis | Stanford News - Stanford University News

European Solidarity party leader and former Ukrainian President Petro Poroshenko has said that he will return to Kyiv on January 17.

"As I promised, I will return to Kyiv on January 17 to show up in court and meet with the prosecutor general, using my right of a people's deputy," Poroshenko wrote on Facebook.

Before that, on January 10-15, he said he would "work in Europe to protect Ukraine from Russian aggression and support democracy in our country," adding that despite a long holiday season, much needs to be done to step up Western support for Ukraine.

Poroshenko earlier announced that he would return to Ukraine from a foreign trip in the first half of January. He left abroad on December 17.

On December 20, Acting Prosecutor General Oleksiy Symonenko signed a notice of suspicion for Poroshenko in the case of coal supplies from the occupied territories.

Kyiv's Pechersky District Court received a petition requiring that Poroshenko be remanded in custody.

According to Ukraine's State Bureau of Investigation, Poroshenko is suspected of "aiding the activities of the terrorist organizations 'LPR' and 'DPR' by acting in collusion with a group of individuals, including representatives of the top leadership of the Russian Federation."

In September-November 2021, an incumbent MP and a former energy minister were declared suspects in the case.

They are suspected of buying coal from non-government-controlled areas in Donetsk and Luhansk regions using state funds. According to the investigation, through their actions they made Ukraine's energy sector dependent on Russia and terrorist organizations, which, in turn, undermined the economic security of the state in 2014-2015, depriving it of any opportunities for diversification of energy sources and providing Russia with greater opportunities for further interference in the internal affairs of Ukraine and subversive activities against the country.

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Poroshenko vows to return to Ukraine on Jan 17 - Ukrinform. Ukraine and world news