Thu, Dec 19, 2013 - Page 6 News List

Russian bailout deepens Ukrainian political strife

Reuters, MOSCOW

Ukrainian President Viktor Yanukovych has secured a US$15 billion bailout from Russia, offering respite for an economy heading ever closer to default, but also drawing accusations he has sold his country out to its former Soviet master.

By grasping the lifeline thrown by Russian President Vladimir Putin, Yanukovych reignited demands for his resignation by opponents at home already enraged by his decision to walk away from a trade and political deal with the EU.

Tens of thousands of protesters gathered in Kiev after Yanukovych accepted Putin’s offer on Tuesday to buy Ukrainian bonds and cut the price of Russian gas exports, a deal which keeps Kiev firmly in Moscow’s orbit.

“We want to go toward Europe, not Russia, that’s our choice,” said Yulia, a student protester, after news of the agreement struck when the two presidents met in the Kremlin.

Opposition leaders have called for mass rallies over the holiday season in a central Kiev square occupied for weeks by protesters, who have pitched tents behind tall barricades.

“He has given up Ukraine’s national interests, given up independence,” Vitaly Klitschko, an opposition leader and former heavyweight boxing champion, told the crowd on Tuesday.

Ukraine urgently needs money to cover an external funding gap of US$17 billion next year — almost the level of the Ukranian central bank’s depleted currency reserves — and avoid defaulting on its debts.

Underlining the depth of the problem, Russian Finance Minister Anton Siluanov said Moscow would buy US$3 billion of Ukrainian eurobonds as early as the end of this week, marking the first installment in debt purchases that are to total US$15 billion.

However, the US warned Kiev that the deal would not satisfy the protesters, and German Chancellor Angela Merkel said ties with Russia should not prevent Kiev from looking West.

“At the moment it seems to be an either-or proposition... We need to put an end to this,” Merkel told ARD TV. “A bidding competition won’t solve the problem.”

Ukraine is caught between Western powers, keen to coax the country into an embrace on the EU’s borders, and Moscow, which has historically held sway over Kiev.

Putin seems determined to stop Ukraine from building a new and close relationship with the EU.

Sitting side-by-side in a gilded Kremlin hall, Putin and Yanukovych rubbed shoulders and laughed while documents were signed on reducing trade barriers for Ukraine.

Moscow also offered relief on Kiev’s gas bill. Russia’s Gazprom has slashed the price Ukraine pays for supplies to US$268.5 per 1,000m3 from about US$400.

In an apparent dig at demands made by the EU under the deal it had offered Kiev, Putin said Russia’s assistance was “not tied to any conditions” — including Ukraine’s accession to a Russian-led customs union of former Soviet republics.

Yanukovych has been seeking the best possible deal for his country of 46 million, but has been criticized in the West after police used force against the protests in the heart of Kiev.

Moscow, accused by European officials of bullying Kiev into dropping the EU deal last month with the threat of economic retaliation, now has great financial leverage over Ukraine. If it withdraws its money and alters the gas price, it could pull the plug on its neighbor.

“Yanukovych made a massive mistake. He’d better not come back here, he’d better stay in Moscow,” said Deni Deyak, a businessman at the pro-EU protest in Kiev.

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