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 Tens of thousands of protesters gathered in Kiev on Tuesday after
President Viktor Yanukovich secured financial assistance and a gas
price discount at talks with President Vladimir Putin, and several
hundred spent the night in the freezing cold.
Russia said it will buy Ukrainian bonds under a deal which keeps
Kiev firmly in Moscow's orbit and out of the European Union's grasp
but sowed doubts in some Ukrainians' minds about what Yanukovich
might have agreed to in secret.
Many of the protesters are angry Yanukovich has spurned an offer of
closer cooperation with Europe and look on Russia with suspicion
after living for decades under Soviet communist rule.
"I think the people will eventually have it their way. We will sign
up to Europe. That's why I'm here," said Snezhana, a factory worker
who spent the night on Kiev's snowy main square.
Irina Litvinianko, a businesswoman, said: "It's hard to imagine it
could end up in anything else but a change of power."
Opposition leaders have called for mass rallies over the holiday
season on the central square occupied for weeks by protesters, who
have pitched tents behind tall barricades.
"He has given up Ukraine's national interests, given up
independence," Vitaly Klitschko, an opposition leader and
heavyweight boxing champion, told the crowd on Tuesday.
Ukraine needs money to cover an external funding gap of $17 billion
next year — almost the level of the central bank's depleted currency
reserves — and avoid defaulting on its debts.
Underlining the depth of the problem, Russian Finance Minister Anton
Siluanov said Moscow would buy $3 billion worth of Ukrainian
Eurobonds as early as the end of this week, marking the first
installment in debt purchases to total $15 billion.
However, the United States warned Kiev the deal would not satisfy
the protesters and German Chancellor Angela Merkel said ties with
Russia should not prevent Kiev from looking West.
"At the moment it seems to be an either-or proposition. ... We need
to put an end to this," Merkel told ARD TV. "A bidding competition
won't solve the problem."
Russian Foreign Minister Sergei Lavrov told parliament on Wednesday
that the West was continuing to put "overt pressure" on Ukraine.
Putin wants to bring Ukraine's big, mineral-rich market into a
Eurasian Union he plans to build with Kazakhstan, Belarus and other
ex-Soviet republics to match the economic might of the United States
and China. Without Ukraine, it looks much weaker.
Putin also seems determined to stop Ukraine, by far the most
populous former Soviet republic after Russia, from building a new
and close relationship with the EU.
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BANDAGE, NOT REMEDY
Sitting side-by-side in a gilded Kremlin hall, Putin and Yanukovich
bumped shoulders and laughed while documents were signed on reducing
trade barriers for Ukraine.
Moscow also offered relief on Kiev's gas bill. Russia's Gazprom has
slashed the price Ukraine will pay for supplies to $268.5 per 1,000
cubic meters from about $400.
In an apparent dig at demands made by the EU under the deal it had
offered Kiev, Putin said Russia's assistance was "not tied to any
conditions" — including Ukraine's accession to a Russian-led customs
union of former Soviet republics.
"Ukraine is our strategic partner and ally in every sense of the
word," Putin said.
The deal boosted the price of Ukraine's dollar debt. Investors said
it would stave off the immediate threat of default or a currency
crisis but would put a heavy burden on Russia, whose own economy is
stuttering.
"This is a rescue. Without that money, Ukraine would have defaulted
some time before the middle of next year," said Chris Weafer, senior
partner with consultancy Macro-Advisory.
One analyst, Lilit Gevorgyan of IHS Global Insight, described the
assistance as a "bandage but no remedy" for an economy that is
heavily dependent on steel and agriculture and has struggled to
modernize since the end of the communist era.
Yanukovich has been seeking the best possible deal for his country
of 46 million but has been criticized in the West after police used
force against the protests in the heart of Kiev.
Moscow, accused by European officials of bullying Kiev into dropping
the EU deal last month with the threat of economic retaliation, now
has great financial leverage over Ukraine,
If it withdraws its money and alters the gas price, it could pull
the plug on its neighbor. Putin appeared to stress this by saying
the agreements on the gas price was temporary.
(Additional reporting by Lidia Kelly in Moscow, Gabriela Baczynska
in Kiev, Justyna Pawlak in Brussels, writing by Alissa de Carbonnel;
editing by David Stamp and Patrick Graham)
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