UPDATE 1-Russia says will honour $15 bln loan pledge to Ukraine

Tue Jan 28, 2014 1:25pm EST

Related Topics

* Deputy prime minister says second part of loan not agreed

* EU, Russia relations strained by Ukraine crisis

* Putin, EU leaders try to clear the air at summit

By Alexei Anishchuk and Justyna Pawlak

BRUSSELS, Jan 28 (Reuters) - Russia will honour its pledge to lend Ukraine $15 billion and reduce the price of gas it supplies to its neighbour even if the opposition forms the next government, President Vladimir Putin said on Tuesday.

However, Russia's Deputy Prime Minister Igor Shuvalov said soon afterwards that Russia and Ukraine had no agreement yet on the second tranche of the $15 billion loan.

Ukraine's Prime Minister Mykola Azarov resigned on Tuesday following weeks of protests at President Viktor Yanukovich's decision in November to turn his back on a trade and cooperation agreement with the European Union in favour of closer ties with Russia.

Russia agreed on credits and cheaper gas for Kiev in December to help its fellow former Soviet republic meet huge debt payments, appearing to give Moscow the edge over Brussels in a tug-of-war for influence over Ukraine.

The deepening political crisis in Ukraine has strained relations between Russian and EU leaders, who have accused each other of interfering in Ukraine's affairs. Relations have also been soured by disputes over trade and energy, for which the EU relies heavily on Russia.

"Regarding your question whether we will review our agreements on loans and the energy sector if the opposition will take power ... No, we will not," Putin said after three hours of talks aimed at clearing the air with EU leaders.

The loan was to "support the people of Ukraine, not the government. It's the people, the common people that suffer," Putin told a news conference, standing side-by-side with European Commission President Jose Manuel Barroso and European Council President Herman Van Rompuy.

However, Putin made clear that Russia would closely monitor Ukraine's economic policies to make sure it got its money back.

GET MONEY BACK

"Despite our large gold and currency reserves, government reserves, $15 billion is the amount that the IMF (International Monetary Fund), a major global organisation, was planning to give to Ukraine. Russia is alone giving it and we want to be sure we get this money back," he said.

"Therefore it is important regardless of which political force leads the government, what economic policy they are intending to apply," he said.

The Ukrainian government said on Monday it was issuing $2 billion in Eurobonds to Russia on the same terms as in December, bringing the total amount borrowed - over two years at an interest rate of 5 percent - to $5 billion.

However, Shuvalov, Russia's deputy prime minister, told reporters in Brussels on Tuesday that Russia and Ukraine had not agreed terms on the second tranche of the loan.

"We have not had any specific agreements before the resignation of (Azarov) on the terms of the second tranche. The finance ministries are holding talks," he said.

"Regardless of which government is formed in Ukraine, we will proceed with our agenda of relaunching the Ukraine economy and promoting economic ties. If the position of the new government is different, we will have the right to consider this issue, report to the president and see how the situation develops," he added.

The EU's strategy of seeking closer political and economic relations with ex-Soviet states was left in tatters when Kiev spurned the EU after Moscow tightened checks on imports from Ukraine and threatened to cut off its gas supplies. Armenia had already opted to join a Moscow-led customs union.

Russia feared an EU-Ukraine trade deal would damage its economy. To calm its concerns, the EU and Russia agreed on Tuesday to hold expert talks on the economic consequences for both sides of EU trade agreements with Moscow's neighbours.

Instead of the normal two-day summit, the EU cut out dinner with Putin on Monday night, sending a message to the Russian leader that it was no longer "business as usual".

Two topless activists from the Ukrainian feminist group Femen staged an anti-Putin protest outside the building where the summit was held hours before the Russian leader arrived.

With the phrases "Good job Putin" and "Putin killer of democracy" written in black ink on their bare chests, the activists chanted "Viva Putin, Viva killer".

The activists said they were protesting against Putin's role in the Ukraine crisis.

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