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Putin Agrees Deal with Yanukovych to Provide Loans and Cheap Natural Gas

Russia has promised Ukraine $15 billion in loans and cheaper natural gas amid ongoing protests in Kyiv calling for closer ties with the European Union rather than Moscow.

The deals were announced after a meeting in Moscow between Russian President Vladimir Putin and his Ukrainian counterpart, Viktor Yanukovych.

Putin said the price of gas supplies to Ukraine would be cut by about one-third to $268.5 per 1,000 cubic meters, from about $400.

He said it was a "temporary solution, bearing in mind that long term contracts should and will be agreed upon regarding both gas supplies to Ukraine and ensuring an uninterrupted transit [of gas] to Russian customers in Europe."

Putin did not elaborate on the duration of the deal. But Ukrainian Deputy Prime Minister Yuriy Boyko said later the price cut would take effect on January 1, 2014, and would be valid until 2019.

Putin also announced that Russia would convert $15 billion worth of its National Welfare Fund, an emergency fund, into Ukrainian securities.

Ukraine urgently needs some $10 billion for looming debt repayments. The announced deal boosted the price of Ukraine's dollar debt, a sign of investors' confidence.

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Russia also agreed to remove trade barriers it put up at the beginning of the year as reprisals for what at the time seemed as Yanukovych's clear intention to sign an Association Agreement with the European Union. But Yanukovych last month unexpectedly scuppered the key deal with the EU, sparking a huge protest movement.

On December 17, thousands of pro-EU protesters responded to a call from the opposition to turn out in force in Kyiv's Independence Square, wary that Yanukovych would bring Ukraine into a Russia-led customs union. But Putin said such a move was not discussed on December 17.

"I want to calm everyone down -- today we did not discuss the issue of Ukraine's accession to the customs union at all," Putin said.

Yanukovych, in turn, praised the results of his meeting with Putin -- a message most likely aimed at showing pro-EU protesters back home that he obtained as much as possible from Putin while keeping Ukraine's European options open.

"Today's meeting confirmed that the interaction between Ukraine and Russia stands on a powerful basis and enjoys good prospects for further development," Yanukovych said. "Our negotiations culminated in us signing a very substantial and broad package of agreements."

Traders, meanwhile, said Russia had also agreed to resume oil supplies to a refinery in Ukraine after a three-year interruption.

'Ukraine As Collateral'

The announced deal, however, was met with skepticism and even anger by the pro-EU opposition.

World heavyweight boxing champion Vitali Klitschko, the leader of the UDAR (Punch) opposition party, told protesters Yanukovych "has given up Ukraine's national interests, given up independence and prospects for a better life for every Ukrainian."

Related article: Ukraine’s Two New Energy Deals

"We must know what has been signed," Klitschko said. "According to our information, Yanukovych used the country as collateral -- he signed a credit agreement worth $15 billion in exchange for Ukrainian assets, strategic objects, machine, aircraft-building enterprises, energy companies, possibly also including the gas-transit system."

Arseniy Yatsenyuk, a leader of the Batkvyshchyna (Fatherland) party, called on Yanukovych to reveal what concessions he offered Moscow in exchange for the bailout deal.

The White House, meanwhile, said that any deal between Ukraine and Russia did not address Ukrainian protesters' concerns.

Yanukovych has argued that signing the EU Association Agreement at a summit in Vilnius last month would have dealt a huge blow to Ukraine's already troubled economy by limiting economic ties with Russia.

While Ukraine needs an estimated $10 billion in loans to keep its economy afloat and meet payment obligations, the most Brussels has so far offered Ukraine is 610 million euros ($838 million).

On December 16 in Brussels, EU foreign ministers reassured Russian Foreign Minister Sergei Lavrov that closer EU-Ukraine ties posed no threat to Russia.

EU foreign-policy chief Catherine Ashton also said the EU remained ready to sign the accord with Kyiv.

Originally published by RFE/RL




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