Russia Gives Ukraine Cheap Gas, Multibillion Dollar Loan

Russia Gives Ukraine Cheap Gas, Multibillion Dollar Loan
# 17 December 2013 17:19 (UTC +04:00)

Russia on Tuesday granted major economic concessions to Ukraine, lowering gas prices and providing a multibillion loan package, in a move that Ukraine’s government may hope will undermine raging anti-government protests.

President Vladimir Putin announced at a meeting with his Ukrainian counterpart in Moscow that Russia will sell gas to Ukraine’s Naftogaz energy company for $268.5 per 1,000 cubic meters, well below the current level of more than $400. Putin said, however, the price may only be lowered temporarily.

Russia will also dip into its national wealth fund to buy $15 billion in Ukrainian eurobonds, Putin said. That will provide desperately needed liquidity for Ukraine, which is currently facing a looming balance of payments crisis.

At the start of a meeting between the Russian leader and Ukrainian President Viktor Yanukoyvch, Putin said he hoped Tuesday to reach a breakthrough in sensitive issues for both sides, and described Ukraine as Russia’s strategic partner.

Putin lamented that bilateral trade had dropped by 14.5 percent over the past two years and said firm action was needed to restore the health of economic ties.

The deals reached Tuesday mark a vital restoration of ties between Ukraine and Russia, which have been by strained by Kiev’s previously stated intention to seek a closer economic relationship with the European Union.

But Ukraine stunned Europe last month by announcing that it was giving up pursuit of an association agreement and trade pact with the EU, favoring its ties with the Moscow-led Customs Union trade bloc instead.

Hundreds of thousands emerged onto the streets of Kiev on Sunday in protests that originally stemmed from that decision. The unrelenting season of protests has created a climate of political tension as the opposition continues to demand the government’s resignation.