UPDATE 1-Russia backed IMF Ukraine loan but thinks Kiev might slip

Tue May 13, 2014 1:14pm EDT

(Adds quotes and context)

MOSCOW May 13 (Reuters) - Russia supported an International Monetary Fund package for Ukraine last week but sees risks of Kiev failing to meet the criteria, Deputy Finance Minister Sergei Storchak said on Tuesday.

The IMF signed off on a $17 billion bailout for Ukraine last week, with tough conditions including steep gas tariff hikes, a floating exchange rate and reducing the budget deficit by about 2 percent of GDP each year from 2014-2016.

"The Russian Federation shared the positive evaluation of the stand-by (loan) for the Republic of Ukraine. Formally this means that the chances of Ukraine not returning the credit is seen as low," Storchak told journalists at a briefing.

But he added that "the success of the programme very strongly depends on several risks which Ukraine, judging by everything, doesn't control yet".

The political situation in Ukraine remains fraught, with continuing violence in eastern Ukraine where pro-Russian separatists refuse to recognise the authority of the new government in Kiev.

Meanwhile, Ukraine has accused Russia of using gas as a political weapon, as Russia demands prepayment of $1.66 billion for June gas deliveries.

Storchak said the primary risk seen by the IMF was a deterioration in trade and economic relations between Russia and Ukraine. "I emphasise: not in the area of gas," Storchak said.

"At the moment the tendency is developing in such a way that signs of restoring normal trade and economic relations between Russia and Ukraine are on the whole absent rather than present," he added. (Reporting by Lidia Kelly, writing by Jason Bush; editing by Tom Heneghan)

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