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Russia nears loan deal with Ukraine to keep it in its orbit

MOSCOW:  Russia signaled on Monday it was about to agree a loan deal with Ukraine to help its indebted neighbor stave off economic chaos and keep it in its former Soviet master’s orbit.

In snowbound Kiev, the opposition went ahead with plans for another big rally for Tuesday against what they see as moves by President Viktor Yanukovich to sell out national interests to Russia after he backed away from a landmark deal with the European Union that would have shifted their country westwards.

An aide to Russian President Vladimir Putin suggested a credit would be agreed at talks with Yanukovich in Moscow on Tuesday, and Ukraine’s energy minister said a deal was also very probable on lower prices for Russian gas.

Yanukovich has turned to Moscow for money after spurning the chance of joining a free trade pact with the EU, despite the risk of protests against him swelling. He also visitedChina this month as he sought the best deal for his country.

“The situation in Ukraine is now such that without loans, from one side or another, they will simply fail to maintain economic stability,” Andrei Belousov, an economic adviser to Putin, told Interfax news agency. “I do not rule out that, if there is a request, a credit could be provided (to Ukraine).”

Russia’s Finance Ministry confirmed talks on a loan were under way. Ukraine’s dollar bond prices rallied and debt insurance costs fell on the growing expectations Moscow could reach agreements with Kiev.

“I consider it a positive. A Russia deal is better for Ukraine in the short term as it is more likely Ukraine will get more financial support more quickly,” said Charles Robertson, emerging markets economist at Renaissance Capital.

Investors have fretted that without international support, Ukraine will struggle to repay debt that falls due next year.

Agreement on Tuesday would also be seen in Moscow as a triumph for Putin keeping Ukraine in Russia’s political and economic orbit more than two decades after the Soviet Union collapsed, and preventing a historic Westward shift by Kiev.

Source: Reuters




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