MOSCOW (Reuters) – Ukraine’s president could secure loans from Russia today when he meets Vladimir Putin at the Kremlin – money that could help fend off economic crisis as anti-government protests continue in Kiev.
Demonstrators demanding that Viktor Yanukovich step down after he spurned a trade and investment deal with the European Union last month plan a new show of force in Ukraine’s capital today as the president meets his Russian counterpart.
Caught between Western powers, keen to anchor the nation of 46 million in a friendly embrace on the EU’s borders, and Moscow, which accuses the West of turning its former Soviet territories against it, Ukraine is in the grip of impending financial crisis that could hit fuel supplies this winter.
President Putin, who meets Yanukovich at 3 pm (1100 GMT), seems set to agree a loan deal, and possibly offer Ukraine a discount on the Russian natural gas on which its people depend.
“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.”
Russia’s Finance Ministry confirmed talks on a loan were under way. Ukraine’s dollar bond prices rallied and debt insurance costs fell as concerns receded that Kiev would become unable to pay its creditors.
Ukraine’s energy minister said a deal was also very probable on lower prices for Russian gas.
Despite snow and freezing temperatures, Yanukovich’s opponents mustered 200,000 people in Kiev on Sunday to call for his removal and for a free trade pact with the European Union, which Yanukovich rejected last month after threats from Russia to cut off gas supplies and block Ukrainian imports.
They have called for a new demonstration today.
Many of those protesting say they fear greater influence from the Kremlin, which exerted oppressive power over Ukrainians during the Soviet period, and see closer ties with the 28-nation EU offering greater freedoms and prosperity.
Many are also complaining about Yanukovich’s record as he prepares to campaign for re-election in just over a year. Opponents, backed by EU leaders, accuse him of manipulating the judicial system to keep opposition leader Yulia Tymoshenko in jail. Ukrainians also begrudge widespread corruption.
Agreement today would also be seen in Moscow as a triumph for Putin keeping Ukraine in Russia’s political and economic orbit more than two decades after the Soviet Union collapsed, and preventing a historic westward shift by Kiev.
Underlying the East-West tug-of-war, Sweden’s foreign minister, Carl Bildt, accused Moscow yesterday of trying to woo Kiev with propaganda and “sometimes outright lies”.
His Russian counterpart Sergei Lavrov, meeting EU foreign ministers in Brussels, took a veiled swipe at the bloc by criticising “external intervention” in Ukraine.
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.
Putin aide Belousov did not say how much Russia, whose own economy is stuttering badly, would be ready to offer Ukraine. But sources in Ukraine said the deal could be worth $15 billion, with Russian providing about $3-5 billion up front.
