Ukraine receives first tranche of Russian bailout

Reuters News
Posted: Dec 24, 2013 7:38 AM
Ukraine receives first tranche of Russian bailout

By Denis Dyomkin

MOSCOW (Reuters) - Russia told Ukraine on Tuesday it had transferred the first $3 billion tranche of a $15 billion bailout, part of plans to keep Kiev firmly within Moscow's orbit and out of the European Union's embrace.

President Vladimir Putin offered Ukraine the lifeline last week, along with a big cut in the price Kiev pays for vital Russian gas supplies, as he tries to persuade Russia's Slavic neighbor to join a customs union of ex-Soviet republics.

"Yesterday ... the first tranche of Ukrainian sovereign debt was acquired for $3 billion," Russian Prime Minister Dmitry Medvedev told his Ukrainian counterpart Mykola Azarov at a meeting in Moscow, in televised comments.

"The money went to the central bank of Ukraine yesterday," he said. Azarov confirmed Ukraine had received it.

President Viktor Yanukovich's pivot back towards Moscow and away from an offer of closer trade ties with the EU has sparked huge protests in Ukraine, sometimes swelling to hundreds of thousands, and the creation of a tent camp in central Kiev.

The protesters accuse Yanukovich of selling out to Ukraine's Soviet-era overlord with the deal on debt and gas prices, which looks to have headed off what could have been a funding crisis for the Ukrainian state next year.

Azarov later joined Putin and the leaders of Kazakhstan, Belarus, Armenia and Kyrgyzstan - ex-Soviet republics that have joined or plan to join trade alliances Russia is building, part of Moscow's drive to restore its influence in its former empire.

Ukraine has so far resisted joining a Russia-led customs union that includes Belarus and Kazakhstan - a big step because membership would scupper any lingering possibility that Kiev might reverse course and sign a free trade deal with the EU.

Any signal that Ukraine might join the customs union would re-invigorate protests in Ukraine, which have started to show signs of flagging despite a constant crowd of a few thousand people at the tent camp in Kiev's Independence Square.

About 100,000 people gathered at the square on Sunday to demonstrate for the fifth weekend in a row, but the number was the lowest this month, and around half the previous weekend's turnout.

Increasingly concerned by an economy set to grow just 1.4 percent this year and only slightly more in 2014, Putin has made closer integration among ex-Soviet states a priority of his third term after 14 years in power.

He is using the customs union as a foundation for a Eurasian Economic Union, due to come into existence in 2015 and has won victories with decisions by Kyrgyzstan and Armenia to move toward joining.

But analysts doubt the union will solve the deep-rooted structural problems the region's economies face and the leader of oil-producing Kazakhstan on Tuesday also repeated a warning that Putin's post-Soviet integration plans must not go too far.

The Eurasian Economic Union "is not an attempt to restore the U.S.S.R.," Nazarbayev said after the broader talks. "The political sovereignty of each state is firm and unshakable."

"We are not forming this union to shut ourselves off from the world around us," he said, making clear Kazakhstan, which is courted by energy-hungry China and the West, does not want the trade alliances to rope it exclusively to Russia.

(Writing by Steve Gutterman; Editing by Gareth Jones and Patrick Graham)