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Russia offers to bail out Ukraine, but the stakes are high

'Ukraine's trade with Russia makes it impossible for us to act in any other way,' Ukrainian President Yanukovych said.

Putin yanukovych ukraine russia oil dealEnlarge
Russia's President Vladimir Putin (R) and Ukrainian President Viktor Yanukovych shake hands after signing documents during their meeting in the Kremlin in Moscow, on December 17, 2013. (ALEXANDER NEMENOV/AFP/Getty Images)

MOSCOW, Russia — Russia extended a major financial lifeline to Ukraine on Tuesday, slashing natural gas prices and providing a multibillion-dollar loan to help shore up Ukraine’s tattered economy.

Russian President Vladimir Putin announced after a meeting in Moscow with his embattled Ukrainian counterpart, Viktor Yanukovych, that Russia would buy $15 billion worth of bonds and reduce the price of natural gas to Ukraine by more than 30 percent.

While Putin said the reduction was temporary, the offer nevertheless raises questions over the conditions — if any — to which Ukraine agreed in exchange for the support.

The move arrives amid weeks-long protests in Kyiv over the government’s refusal last month to sign key agreements with the European Union that would’ve pulled the post-Soviet country further away from Russia’s embrace.

It also shifts the balance toward Moscow in a geopolitical standoff between Russia and the EU over a strategically important country currently embroiled in a political crisis.

In recent months, the Kremlin has applied political and economic pressure to coax Kyiv into joining a Moscow-led customs union with Belarus and Kazakhstan, which Russian officials see as an alternative to European integration.

It suspended imports of some Ukrainian goods and threatened trade sanctions if the country signed the sweeping political and trade agreements with Brussels.

While those agreements are still formally on the table, top European officials have expressed frustration with what they say is the Yanukovych regime’s lack of commitment to signing them.

Yanukovych has both signaled that he still intends to sign the deals and bashed their original terms as harmful to Ukraine’s national interests.

Analysts suggest Yanukovych, who is struggling to fend off massive demonstrations at home and eyeing reelection in 2015, has sought to strike the best possible short-term deal for his cash-strapped country.

Brussels has also offered financial assistance to Ukraine but insists the country undertake major economic reforms in exchange.

Prior to his visit to Moscow, opposition leaders feared Yanukovych might commit Ukraine to the customs union — a move they say amounts to selling out the country to Russia.

But at the meeting, Putin attempted to assuage those fears.

“I want to calm everyone down — today we did not discuss the question of Ukraine’s accession to the customs union.”

Yanukovych, meanwhile, defended the deal by arguing he had few other options.

“Ukraine's trade with Russia makes it impossible for us to act in any other way,” he said, according to The Wall Street Journal.

Russia’s offer will likely inflame a protest movement furious at Yanukovych for pulling back from Europe and rebelling against what demonstrators say has been Moscow’s traditionally forceful hand over Ukraine.

On Tuesday evening, opposition leaders reacted sharply to the news.

Boxing champion Vitali Klitschko, head of the UDAR party, even appeared to throw down the proverbial gauntlet as he repeated the opposition’s demands for snap elections.

“I’m calling out Yanukovych — he is my personal rival, and I’m calling him into the ring,” he told protesters on Independence Square, the nerve center of the demonstrations.

Analysts say Ukraine, which is heavily dependent on Russia for energy and trade, is lurching toward bankruptcy and needs more than $10 billion to avoid economic collapse.

http://www.globalpost.com/dispatch/news/regions/europe/131217/ukraine-russia-loan-deal-stakes-high