Russia Claims to be Close to Making a Deal with Ukraine

Russia has hinted that it is close to agreeing a deal with Ukraine to offer a loan and lower natural gas prices in an effort to help Kiev avoid an economic crisis, and keep the country under Moscow’s influence.

Already opposition to Ukrainian President Viktor Yanukovich has begun to prepare another rally to protest against moves to ignore national interests and turn to Russia for support, in favour of the EU, as the people want. Last week Yanukovich turned down the free-trade deal previously agreed with the EU, to renew talks with Russia.

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Andrei Belousov, an economic advisor to Russian President Vladimir Putin, has stated that “the situation in Ukraine is now such that without loans, from one side or another, they will simply fail to maintain economic stability. I do not rule out that, if there is a request, a credit could be provided (to Ukraine).”

Reuters reports that Russia’s Finance Ministry has confirmed that talks with Ukraine are in progress, and Eduard Stavitsky, the Ukrainian Energy Minister, has admitted that a deal is very likely to be reached that will reduce the price Ukraine pays for natural gas supplies from Russia.

Belousov never mentioned exactly how much Russia might be willing to offer Ukraine, but other sources told Reuters that the deal could be worth $15 billion, with $3-5 billion provided up front. The EU on the other hand only initially offered €610 million ($839 million), however they are now in discussions with the IMF, World Bank, and other large financial institutions in search of a way to help Ukraine.

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Štefan Füle, the European Commissioner for Enlargement, tweeted on Sunday that the EU was no longer working on a deal with Ukraine due to the recent actions of Yanukovich and his government, suggesting that they have lost patience with Kiev’s games and attempts to create a bidding war with Russia.

Although Frans Timmermans, the Dutch Foreign Minister, warned; “I think making policy on the basis of a Twitter notice by Mr Fuele is perhaps not the best way of approaching this issue.”

It is possible that Yanukovich is trying to play Brussels off against Moscow as he looks for the best deal possible in order to secure finance to pay off its huge debt in outstanding gas payments, however he also runs the risk of alienating both countries.

By. Charles Kennedy of Oilprice.com