Yields on Ukraine's sovereign Eurobonds jumped by 40 basis points on December 1, to reach an all-time-high of 20% by midday, according to Bloomberg.

The move came after Ukraine announced that it had failed to make an advance payment for December gas to Russia, and a visiting IMF team left without meeting with government officials, and is reportedly not to return before January.

As Arctic temperatures hold Ukraine in its grip, with daytime temperatures at -5C, Ukraine's acting energy minister Yury Prodan said that Ukraine had not made any advance payment to Russia's Gazprom for December gas, estimated at 1bn-1.5bn cubic meters, costing $385m-$578m.

Previously Prodan had said that Ukraine would make the prepayment before the end of December, Reuters reported on November 18. Prodan did not explain why Ukraine's gas company Naftogaz had failed to make the scheduled payment, which was part of an agreement reached between Ukraine, Russia and the EU on October 30.

Besides the advance payment for December gas, Ukraine also agreed to pay $1.6bn as a second tranche of payment on arrears to Russia for gas supplies. Once those are paid, according to Olena Bilan, economist at Kyiv boutique Dragon Capital, Ukraine's international reserves, at only $12.6bn in October, could hit single digits by the end of the year.

At the same time, an IMF team announced its departure from Kyiv without having met with government officials since there is currently only an acting government in place, as Ukraine waits for a new government to be appointed following elections on October 26.  According to sources cited by Interfax, the IMF mission will not return before January 12.

Ukraine's devaluation has nixed attempts to reduce Naftogaz' operating deficit by raising domestic gas tariffs for households and utilities,  Prime Minister Arseny Yatsenyuk acknowledged on Novermber 26. Eliminating the difference between domestic gas tariffs and the price at which Ukraine acquires gas internationally is a primary requirement of international donors for Ukraine's new government. 

Ukraine painfully hiked gas prices in the spring, after the ousting of former president Viktor Yanukovych, in order to gain a first tranche of IMF funding. But following a 50% devaluation of the currency, the hiked prices are back to where they were before in the dollar terms at which Ukraine buys its gas. "Measures on increasing the tariffs produced no results due to the hryvnia exchange rate decrease. We did not manage to compensate the deficit of national joint-stock company Naftogaz Ukrainy," Yatsenyuk said, opening a government meeting.  

Ukraine's National Bank (NBU) announced on December 1 it would prolong for another three months the harsh measures limiting the sale of hard currency to the population, according to Interfax. With the hryvnia devaluation threatening Ukraine with default, the NBU has effectively frozen the hryvnia at just under the UAH16 mark, although the hryvnia is trading at UAH18 on the black market, in order to make hard currency payments, in particular to Russia for gas. But the strategy brings with it the risk of a chaotic devaluation at a later point, say analysts. 

Political pressure is mounting on the governor of the National Bank of Ukraine, Valeriya Gontareva to resign. With  parliament now in session after the October election campaign, the NBU head, a close ally of president Petro Poroshenko, makes an easy target for disaffected groups in the Rada. A draft resolution calling for her resignation was tabled on November 28 by two independent MPs, according to Interfax Ukraine. 

Gontareva's refusal to bail out troubled banks has won her enemies among oligarchs, with egg oligarch Oleh Bakhmatyuk's bank VAB, a top 20 bank, having its licence withdrawn on November 28. VAB depositors demonstrated in Kyiv on December 1, blocking off the road to the NBU, as Bakhmatyuk claimed that the collapse of his bank was the fault of temporary administration imposed on the bank by the NBU. Around 35% of the bank's loans are reported to have been made to related parties.

Adding to the bad news for Ukraine, the EU enlargement commissioner Johannes Hahn announced that an international donor conference for Ukraine would only take place after reforms have been not only drawn up by a new government, but at least partly implemented, especially in the sphere of rule of law and corruption. Hahn said that when this was done, the conference could be named as "a conference of reforms" or a "conference of investors" rather than donors' conference, according to Interfax.