UKRAINE SAYS TRUCE TAKES HOLD AS ARMY BEGINS WEAPONS PULLBACK

Ukraine signaled the latest attempt at peace in its easternmost regions is taking hold and said the military would start withdrawing heavy weapons from the front lines. There were no cease-fire breaches after 12:45 a.m. local time, the military said Thursday, before announcing the arms removal. While Russian Foreign Minister Sergei Lavrov accused the U.S. and Europe of seeking to derail dialogue, he said the peace deal was showing tangible results and there are no “ideal truces.” The rebels said some fighting continues. Guns falling silent would mark the biggest progress since the leaders of Ukraine, Russia, Germany and France sealed the cease-fire in Minsk, Belarus, on Feb. 12. Since then, insurgents have seized a key transport hub and the U.S. and the European Union have threatened more sanctions against Russia, which denies backing the rebels militarily. The hryvnia has hit record lows as the government races to obtain emergency funding. “The situation in the conflict zone is stabilizing,” military spokesman Andriy Lysenko said Thursday in Kiev. “We didn’t record a single shooting at our positions during the night. We see only individual armed provocations.” The lack of progress in recent weeks on bringing peace to Donetsk and Luhansk has further hurt Ukraine’s currency. The nation is still awaiting the first cash from a $17.5 billion International Monetary Fund rescue and investors are nearing talks to ease terms on the government’s foreign debt. Gas Warning The hryvnia, which has plunged 53 percent this year alone amid a deepening recession and international reserves at the lowest in at least a decade, traded about the same as its Tuesday close. The central bank lifted a ban on foreign-currency trading late Wednesday, the same day it imposed the restriction that aimed to stem the hryvnia’s freefall. In another drag on Ukraine’s shrinking economy, President Vladimir Putin urged the government in Kiev Wednesday to ensure energy supplies to rebel-held areas and said Russian gas shipments to Ukraine would stop if the country doesn’t make prepayments, a move that may threaten transit to Europe. State- run OAO Gazprom said Thursday it’s ready to discuss separate shipments for Ukraine and rebel-held territory. Ukraine had said the cease-fire must be fully adhered to for two days before it could pull weapons back behind pre- determined buffer zones. The separatists say they’ve removed 400 pieces of heavy arms from the front lines and urged monitoring by the Organization for Security and Cooperation in Europe. The rebels continue to restrict access for observers, the OSCE said. ‘Very Skeptical’ EU President Donald Tusk said Wednesday that he’s “very skeptical” about the cease-fire. More sanctions against Russia over the 11-month crisis, which has sent its relations with the EU and the U.S. to post-Cold War lows and killed more than 5,600 people, are still “on the table,” he said. German Chancellor Angela Merkel said that while pursuing diplomacy, “we say just as much that we can’t rule out sanctions if things get worse.” A rebel move to take the port of Mariupol, or a similar attack, “would immediately merit a much more significant response, which is teed up, and that could be a very serious next level of sanctions coupled with other choices the president may or may not make,” U.S. Secretary of State John Kerry said Wednesday in Washington. President Barack Obama hasn’t decided whether to supply defensive weapons to Ukraine, he said. The EU and the U.S. aren’t willing to push for implementation of the Minsk accord, Lavrov told reporters Thursday, accusing them of making “farcical demands.” --With assistance from Elena Mazneva in Moscow, Patrick Donahue in Berlin, Terry Atlas in Washington and Marton Eder in Budapest.