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 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 on Tuesday 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.
"There's nothing for Yanukovich to do in Moscow. We didn't ask him
to go there and sell Ukraine," said Maria Sirenko, a 40-year-old
housewife, one of about 2,000 demonstrators already gathered in
central Kiev.
Several hundred protesters also lined the main road to the airport,
with one banner saying: "Yanukovich, turn the plane round to
Europe."
President Putin, who meets Yanukovich at 3 p.m. (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 on Tuesday.
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
detest widespread corruption.
EAST VS. WEST
Agreement on Tuesday 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.
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Underlying the East-West tug-of-war, Sweden's foreign minister, Carl
Bildt, accused Moscow on Monday 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 criticizing
"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.
The most Brussels has so far offered Ukraine is 610 million euros
($838 million) but EU officials are in discussion with the
International Monetary Fund, the World Bank and other financial
institutions on ways to help Ukraine.
Apart from loans, Ukraine is seeking a lower price for Russian gas — now at around $400 per 1,000 cubic meters — to help it cope with its
debt burden.
Ukrainian Prime Minister Mykola Azarov says he hopes a deal on
cheaper gas prices will soon be concluded. A reduction of at least
10-15 percent is likely, sources in Kiev said.
Tuesday's talks are intended to conclude a "substantial package" of
agreements to chart out a road map to removing trade barriers for
Ukraine with Russia, both sides say.
Yanukovich is seeking the best deal possible for Ukraine but playing
East against West is a hazardous maneuver running the risk of
alienating both parties and there is no certainty Ukraine can avoid
default or a currency crisis.
Putin regards Ukraine as vital to creating a political and economic
union stretching from the Pacific to the EU's borders. But
Yanukovich is not expected to sign Ukraine up for a Russia-led
customs union which Putin sees as the basis for this.
Holding out on membership of the customs union could be Yanukovich's
last bargaining chip as he tries to survive the protests in Kiev and
win a presidential election in 2015.
(Additional reporting by Pavel Polityuk and Natalia Zinets in Kiev,
editing by Alastair Macdonald, Alison Williams and Elizabeth Piper)
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