News / Economy

Russia Eyes Loan, Gas Deal to Keep Ukraine in its Orbit

Pro-European protesters warm themselves at a fire in front of barricade in central Kyiv, Dec. 16, 2013.
Pro-European protesters warm themselves at a fire in front of barricade in central Kyiv, Dec. 16, 2013.
Reuters
Russia signaled on Monday it was about to agree to a loan and gas deal with Ukraine to help Kyiv stave off economic chaos and keep it in its former Soviet master's orbit.
 
In Kyiv, the opposition went ahead with preparations for another big rally for Tuesday against what they see as moves by President Viktor Yanukovich to sell out national interests to Russia after backing 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 a Ukrainian minister said a deal was likely 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.
 
  • Portraits of Ukrainian President Viktor Yanukovych and Prime Minister Mykola Azarov are seen at a barricade during a rally in central Kyiv, Ukraine, Dec. 20, 2013.
  • A woman passes by Interior Ministry personnel as they block pro-EU demonstrators near the Ukrainian Ministry of Internal Affairs in Kyiv, Ukraine, Dec. 20, 2013.
  • Ukrainian pro-EU demonstrators warm themselves by a fire during a rally in Independence Square, Kyiv, Ukraine, Dec. 20, 2013.
  • A pile of garbage bags left by pro-European integration protesters lies in front of riot police officers in Kyiv, Ukraine, Dec. 20, 2013.
  • A Pro-European Union activist guards an entrance to the tent camp in Independence Square in Kyiv, Ukraine, Dec. 19, 2013.
  • A man reads a newspaper with a picture of Russian President Vladimir Putin on the front page during a pro-European Union rally in Independence Square, Kyiv, Ukraine, Dec. 19, 2013.
  • Pro-European Union activists warm themselves sitting in their shelter inside a barricade during a rally in Independence Square, Kyiv, Dec. 18, 2013.
  • Pro-European Union activists pass through a police line as they march against the government in Kyiv, Dec. 17, 2013.
  • A pro-European Union activist stands while warming himself near a bonfire at a heavily fortified tent camp in Independence Square in Kyiv, Dec. 17, 2013.
  • A man stacks wooden bars showing names of Ukrainian cities and settlements that are hometowns of demonstrators, during a rally in Independence Square in Kyiv, Dec. 16, 2013.
  • Pro-European integration protesters eat free meals near a barricade during a rally in Independence Square in Kyiv, Dec. 16, 2013.
  • Pro-European Union activists rally in Independence Square, Kyiv, Dec. 15, 2013. 

“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, and Ukrainian Energy Minister Eduard Stavitsky said there was a great probability a deal could be reached on reducing the price of Russian energy supplies to Ukraine.
 
Agreement on Tuesday would be seen in Moscow as a move keeping Ukraine in its political and economic orbit, more than two decades after the Soviet Union collapsed, and preventing a historic Westward shift by Kyiv.
 
The EU's enlargement chief said on Twitter on Sunday the 28-nation bloc was halting work on a trade and political pact with the country of 46 million because the deeds of Yanukovich and his government were “further and further apart.”
 
Stefan Fuele's words suggested the EU had lost patience with Kyiv's demands for financial aid and was irritated by the 'bidding war' with Russia over Ukraine. But divisions emerged in Brussels as other officials said the door remained open.
 
“I think making policy on the basis of a Twitter notice by Mr. Fuele is perhaps not the best way of approaching this issue,” Dutch Foreign Minister Frans Timmermans said.
 
Ukraine is seeking help to cover an external funding gap of $17 billion next year - almost the level of the central bank's depleted currency reserves.
 
Belousov did not say how much Russia, whose own economy is stuttering badly, would offer Ukraine. But sources in Ukraine said the deal could be worth $15 billion, with Russian providing about $3-5 billion up front.
 
The most Brussels has so far offered Ukraine is 610 million euros [$837.56 million] but EU officials are in discussion with the International Monetary Fund, the World Bank and other financial institutions on ways to help Ukraine.
 
Putin eyes victory
 
Apart from loans, Ukraine is seeking a lower price for Russian gas - now at around $400 per 1,000 cubic meters - to help it cope with its debt burden.
 
Ukrainian Prime Minister Mykola Azarov was quoted as saying on Sunday that he hoped a deal on a cheaper price for gas deliveries would soon be concluded. A reduction of at least 10-15 percent is likely, sources in Kyiv said.
 
Tuesday's talks are intended to conclude a “substantial package” of agreements to chart out a road map to removing trade barriers for Ukraine with Russia, both sides say.
 
Yanukovich may be attempting to keep the attention of both Moscow and Brussels to strike as good a deal as possible to handle its huge debt and outstanding gas payments to Moscow.
 
But it is a hazardous maneuver running the risk of alienating both parties and there is not certainty Ukraine can avoid default or a currency crisis.
 
Securing an agreement with Ukraine would be hailed in Russia as a geopolitical victory for Putin, who regards Ukraine as vital to his dream of creating a political and economic union stretching from the Pacific to the EU's eastern borders.
 
But Yanukovich is not expected to sign Ukraine up for a Russia-led customs union which Putin sees as the basis for his planned Eurasian Union stretching from the borders of Poland to the shores of the Pacific Ocean.
 
Holding out on membership on the customs union could be Yanukovich's last bargaining chip as he tries to balance East against West and secure a good enough deal to be able to survive the protests in Kyiv and win a presidential election in 2015.
 
In Kyiv, the main protest camp had thinned out again on Monday after about 200,000 people protested on Sunday. A few thousand people were listening to prayers, speeches and songs, trying to warm themselves after snowfall during the night.
 
But these numbers could swell again on Tuesday. Leaders of Yanukovich's Party of Regions expressed dissatisfaction with the economic crisis and urged Azarov to take action against ministers who had 'underestimated' the effects on the economy of trying to strike a deal with the EU.

You May Like

Obama: I Will Do 'Everything I Can' to Close Guantanamo

US president says prison continues 'to inspire jihadists and extremists around the world' More

Sierra Leone Educates on Safe Ebola Burials

Also, country is improving at rapid response to isolated outbreaks, but health workers need to be even faster, officials say More

Christmas Gains Popularity in Vietnam

Increasingly wealthy Vietnamese embrace holiday due to its non-religious glamor, commercial appeal More

Featured Videos

Your JavaScript is turned off or you have an old version of Adobe's Flash Player. Get the latest Flash player.
US Decision on Cuba Underscores Divisions Among Miami Cubansi
X
Sharon Behn
December 19, 2014 9:34 PM
For decades, older, more conservative Cubans have been gathering at Café Versailles on the corner of Calle Ocho to eat Cuban food and talk politics. After hearing of President Barack Obama’s decision, a number of them gathered in front of the café with posters to protest. VOA's Sharon Behn reports on the situation.
Video

Video US Decision on Cuba Underscores Divisions Among Miami Cubans

For decades, older, more conservative Cubans have been gathering at Café Versailles on the corner of Calle Ocho to eat Cuban food and talk politics. After hearing of President Barack Obama’s decision, a number of them gathered in front of the café with posters to protest. VOA's Sharon Behn reports on the situation.
Video

Video Three Cities Bid for Future Obama Presidential Library

President Barack Obama still has two years left in his term in office, but the effort to establish his post-presidential library is already underway. The bid for the Obama Presidential Library is down to four locations in three states -- New York, Hawaii, and Illinois. As VOA’s Kane Farabaugh reports, each of them played an important part in the president’s life before he reached the White House.
Video

Video Cuba Deal is Major Victory for Pope’s Diplomatic Initiatives

Pope Francis played a key role in brokering the US-Cuba deal that was made public earlier this week. It is the most stunning success so far in a series of peacemaking efforts by the pontiff. VOA religion reporter Jerome Socolovsky has more.
Video

Video Fears of More Political Gridlock in 2015

2014 proved to be a difficult year politically for President Barack Obama and a very good year for the U.S. Republican Party. Republican gains in the November midterm elections gave them control of the Senate and House of Representatives for the next two years -- setting the stage for more confrontation and gridlock in the final two years of the Obama presidency. VOA National Correspondent Jim Malone has a preview from Washington.
Video

Video Sudan School Becomes Target of Aerial Attacks

The school dropout rate is at an all-time high in Sudan's South Kordofan state because many schools have been destroyed during the three-year civil war between the government and SPLA-N rebel forces. Adam Bailes visited Sudan's Nuba Mountains' region and reports many children are simply too scared to go to school
Video

Video VOA Reporter Tours Devastated Peshawar School

Islamist militants wearing military uniforms and strapped with explosives attacked a military run school Tuesday in the northwestern Pakistani city of Peshawar. At least 141 people were killed in the horrific attack, most of them young students. VOA reporter Ayaz Gul visited the devastated school and attended the funeral of the principal who courageously tried to save her students from the deadly attack.
Video

Video Nigerians Fleeing Boko Haram Languish in Camp Near Capital

In its five-year effort to impose Islamic law in northeastern Nigeria, the Boko Haram extremist group has killed thousands of people and forced hundreds of thousands to flee. Some of those who ran for their lives now live in squalor on the edges of the capital, Abuja. Chris Stein reports for VOA.
Video

Video Aceh Rebuilt Decade After Tsunami, But Scars Remain

On December 26, 2004 there was an earthquake in the Indian Ocean so powerful it caused the Earth’s axis to wobble a few centimeters. Onshore on the island of Sumatra, the resulting tsunami was devastating. A decade later, VOA Correspondent Steve Herman reports from Banda Aceh, Indonesia, where although there is little remaining evidence of the physical devastation, the psychological scars among survivors remain.

All About America

AppleAndroid

World Currencies

EUR
USD
0.8143
JPY
USD
119.23
GBP
USD
0.6390
CAD
USD
1.1596
INR
USD
63.304

Rates may not be current.