MOSCOW Dec 16 Russia signalled on Monday it was
about to agree a loan and gas deal with Ukraine to help Kiev
stave off economic chaos and keep it in its former Soviet
In Kiev, 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.
"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 Minsitry 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 Kiev.
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
Kiev'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 metres - 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 Kiev 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 manoeuvre 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 Kiev and win a presidential election in 2015.
In Kiev, 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.
($1 = 0.7283 euros)
(Additional reporting by Richard Balmforth and Gabriela
Baczynska in Kiev, and by Andrius Sytas in Vilnius, Writing by
Timothy Heritage; editing by Ralph Boulton)