Kremlin-backed separatists in Ukraine to use Russian rouble as official currency

Parts of eastern Ukraine occupied by Kremlin-backed separatists will start to use the Russian rouble, in a move that will plunge the region's already struggling peace process into further turmoil.

The Council of Ministers in the self-proclaimed Luhansk People’s Republic (LPR) voted to adopt a decree that establishes the rouble as its official currency.

LPR is a break-away region in the south of the state of Luhansk, claimed by rebel groups allied to Moscow in May 2015.

Switching away from Ukraine’s hryvnia will have both financial and political implications.

The decision, which comes into force on 1 March, was taken " to stabilise the financial and monetary system”, LPR’s governing body said.

It “establishes that the basic unit of currency in the territory of the Luhansk People's Republic of the Russian rouble”.

Rebels made similar moves to establish the rouble as LPR’s official currency two years ago.

At the time, Vladimir Putin’s spokesman welcomed the move, saying it showed the rouble was a “reliable… and international” currency.

The action adds more weight to concerns that a peace deal between Ukraine and rebels fighting in the east of the country remains unlikely in the short- to medium-term.

Earlier this month, Russia angered the Ukrainian government after it began recognising passports issued by separatist groups in LPR and neighbouring Donetsk, which has its own so-called people’s republic.

It also gave birth, marriage and death certificates, identification, qualification and vehicle registration certificates issued by pro-Russian rebel “authorities” official recognition in Russia.

Spokesman Dmitry Peskov said the decision was made on humanitarian grounds to aid residents caught up in the conflict and who were living in rebel-held regions.

But Kiev said it considered the move as a sign that Moscow was withdrawing from the Minsk agreement - the plan to bring peace to Ukraine.

Russia has denied allegations by the West that is is arming rebels and sending troops across the border.

But it has also made no secret of its political backing for the rebel “republics”, which were created after referendums held in May 2014 that claimed to show strong support for independence in Donetsk and Luhansk.