* Ukraine's Yanukovich holds Moscow talks with Putin
* Anti-government protest planned in Kiev
* Yanukovich made policy U-turn on Europe trade deal
By Darya Korsunskaya and Timothy Heritage
MOSCOW, Dec 17 Russia agreed a $15 billion
bailout for Ukraine and slashed the price of gas exports on
Tuesday under a deal that keeps the cash-strapped country in
Moscow's orbit but fuelled street protests in Kiev.
Vladimir Putin's lifeline to Ukrainian President Viktor
Yanukovich was a triumph for the Russian leader in a
geopolitical battle with the Europe Union. But the deal saddles
Russia with a heavy financial burden and he failed to lure
Ukraine into a customs union with other ex-Soviet republics.
Tens of thousands of protesters gathered in Kiev within
hours of the agreement and accused Yanukovich of selling his
country to the highest bidder after walking away from a trade
deal with the EU.
"He has given up Ukraine's national interests, given up
independence and prospects for a better life for every
Ukrainian," Vitaly Klitschko, a protest leader and heavyweight
boxing champion, told crowds on Kiev's Independence Square.
The United States said the deal would not address the
concerns of the protesters, and German Chancellor Angela Merkel
said Kiev should not be forced into allying itself with Moscow
or the EU, to the exclusion of the other.
"At the moment it seems to be an either-or proposition. ...
We need to put an end to this. Ukraine can't do this alone.
Europe and Germany must continue to talk with Russia," she told
ARD TV. "A bidding competition won't solve the problem."
The leaders of Ukraine and Russia clinched the deal at talks
in the Kremlin that appeared to begin frostily but ended with
them rubbing shoulders and laughing at a ceremony where
documents were signed on reducing trade barriers for Ukraine.
Russian Finance Minister Anton Siluanov said Moscow would
tap the National Welfare Fund, a rainy day fund, to buy $15
billion worth of Ukrainian Eurobonds. The deal boosted the price
of Ukraine's dollar debt, a sign of investors' confidence.
Underlining the urgency of Kiev's problems, Interfax news
agency quoted Siluanov as saying Russia may buy $3 billion in
two-year Ukrainian bonds as soon as the end of this week.
Moscow also offered relief on the gas price. Ukraine's
Naftogaz energy company will pay Russia's Gazprom
$268.5 per 1,000 cubic metres of natural gas, on which it is
heavily dependent. The previous price had been about $400.
"Ukraine is our strategic partner and ally in every sense of
the word," Putin said after the talks, with Yanukovich sitting
beside him in a gilded Kremlin hall.
"This (assistance) is not tied to any conditions," he added.
"I want to calm you down - we have not discussed the issue of
Ukraine's accession to the customs union at all."
INVESTORS ENCOURAGED BUT SEE RISKS
Ukraine had been seeking help to cover an external funding
gap of $17 billion next year - almost the level of the central
bank's depleted currency reserves.
Investors said the deal would stave off the immediate threat
of default or a currency crisis but said there were also risks
for Russia, whose own economy is stuttering.
"This is a rescue. Without that money, Ukraine would have
defaulted sometime before the middle of next year ... And the
cheap gas will provide a significant stimulus," said Chris
Weafer, senior partner with consultancy Macro-Advisory.
"The next move is for the protesters in Kiev."
Ukraine, which had fears fuel supplies could be hit during
the financial crisis, is caught between Western powers, keen to
anchor the country in a friendly embrace on the EU's borders,
and its former Soviet masters in Moscow.
Yanukovich has been seeking the best possible deal for his
country of 46 million but faces calls to resign at home and has
been criticised in the West after police used force against the
protests in the heart of Kiev.
The deal appears to preclude Ukraine looking West in the
near future, though its leaders say they still see building ties
with the EU as a possible long-term goal.
Commentators saw the bailout as Ukraine's reward from Moscow
for scrapping the planned pact with Europe last month. "This
refusal had a cost, and Russia has paid," Russian former economy
minister Andrei Nechayev told Ekho Moskvy radio.
Moscow now has a financial hold over Ukraine: If it
withdraws its money and alters the gas price, it could pull the
plug on its neighbour. Putin appeared to underline this by
saying the agreements on the gas price and $15 billion
investment were temporary.
Russia also agreed to resume oil supplies to a refinery in
Ukraine following a three-year break, traders said.
But Putin will be disappointed if he cannot bring Ukraine
into the Eurasian Union he plans to build with Kazakhstan,
Belarus and other former Soviet republics to match the economic
might of the United States and China.
Ukraine is by far the most populous ex-Soviet republic after
Russia, and with its large market, mineral resources and borders
with the EU, is vital to that project. Yanukovich may be
withholding Ukraine's membership to seek more concessions.
People at anti-government demonstrations in Kiev that have
at times attracted hundreds of thousands fear Ukraine will now
be stuck in Moscow's orbit, more than two decades after the fall
of Soviet communist rule.
"With what has been signed now in Moscow, we can forget
about Europe. Yanukovich 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-Europe protest in Kiev.