Moscow: Russia agreed a $15-billion bailout for Ukraine and slashed the price of gas exports on Tuesday under a deal that keeps the cash-strapped country in Moscow’s orbit but fuelled street protests in Kiev.
Vladimir Putin’s agreement with Ukrainian President Viktor Yanukovich was a triumph for the Russian leader in a geopolitical battle with Europe.
But he failed to lure Ukraine into a customs union with other ex-Soviet republics and the deal is a heavy financial burden for Russia.
Tens of thousands of protesters gathered within hours of the deal in Kiev and accused Yanukovich of selling his country to the highest bidder after walking away from a trade deal with Europe.
“He has given up Ukraine’s national interests, given up independence and prospects for a better life for every Ukrainian,” Vitaly Klitschko, a protest leader and heavyweight boxing champion, told crowds on Kiev’s Independence Square.
The United States said any agreement between Ukraine and Russia would not address the concerns of the protesters.
The two countries’ leaders reached agreement at talks in the Kremlin that appeared to begin frostily but ended with them rubbing shoulders and laughing at a ceremony where documents were signed on reducing trade barriers for Ukraine.
Russian Finance Minister Anton Siluanov said Moscow would tap a National Welfare Fund – a rainy day fund – to buy $15billion worth of Ukrainian Eurobonds. The deal boosted the price of Ukraine’s dollar debt, a sign of investors’ confidence.
Ukraine’s Naftogaz energy company will pay Russia’s Gazprom $268.5 per 1,000 cubic metres of natural gas, on which it is heavily dependent. The previous price had been about $400per 1,000 cubic metres.
“Ukraine is our strategic partner and ally in every sense of the word,” Putin said after the talks, with Yanukovich sitting beside him in a gilded Kremlin hall. “I want to draw your attention to the fact that this(assistance) is not tied to any conditions … I want to calm you down – we have not discussed the issue of Ukraine’s accession to the customs union at all today.”
Ukraine had been seeking help to cover an external funding gap of $17 billion next year – almost the level of the central bank’s depleted currency reserves.
Investors said the deal would stave off the immediate threat of default or a currency crisis but said there were also risks for Russia, whose own economy is stuttering.
“This is a rescue. Without that money, Ukraine would have defaulted sometime before the middle of next year … And the cheap gas will provide a significant stimulus for the Ukraine economy,” said Chris Weafer, senior partner with consultancy Macro-Advisory. “The next move is for the protesters in Kiev.”