Ukraine divided over impact of opaque Russian bailout deal

EU says deal with Ukraine is still on table

A pro-EU activist plays a piano in a street near a rally in Independence Square in Kiev yesterday. Photograph: AP Photo/Dmitry Lovetsky

A pro-EU activist plays a piano in a street near a rally in Independence Square in Kiev yesterday. Photograph: AP Photo/Dmitry Lovetsky

Thu, Dec 19, 2013, 01:00

Ukraine’s government says the country has been saved from economic and social collapse by a Russian bailout, which opposition leaders call a poisonous Kremlin reward for Kiev’s rejection of a pact with the European Union.

Moscow pledged on Tuesday to lend $15 billion (€10.9 billion) to Ukraine and slash the price it pays for Russian gas, but the opacity of the deal prompted critics to suspect that Kiev may have made long-term pledges and swapped key national interests for cash from the Kremlin.

The deal was signed as large numbers of protesters continued to demand the resignation of Ukrainian president Viktor Yanukovich and his government, whom they accuse of scrapping plans for EU integration in favour of closer ties with Russia and possible membership of a Moscow-led customs union of ex-Soviet states.

“What was Ukraine facing? The answer is clear: bankruptcy and social collapse. That’s the new year’s gift that awaited Ukraine’s people,” Ukrainian prime minister Mykola Azarov said yesterday.

“I can firmly declare today that we have passed a watershed, and now we have the opportunity and full confidence to maintain social and financial-economic stability . . . We won’t allow anyone to destabilise a situation that has been normalised through such strenuous efforts.”


Stave off insolvency
Analysts said the deal should allow Ukraine to stave off insolvency and plug holes in its budget for perhaps 18 months.

Protesters said the agreement was Russia’s way of helping Mr Yanukovich avoid unpopular cost-cutting measures and spend his way to victory in elections planned for 2015, while keeping the pro-EU opposition out of power and maintaining huge influence over Ukraine.

“Russian money has beaten European values . . . it’s a geopolitical victory for Russia,” said opposition leader Arseniy Yatsenyuk.

“Russia’s influence in post-Soviet countries is growing. And now, Russia has paid president Yanukovich and his regime for not signing the agreement with the EU . . . This president never shared European values – to him, it’s not about values but about money.”

Mr Yatsenyuk said Mr Yanukovich may have secretly pledged to Russian counterpart Vladimir Putin that Ukraine would join the customs union if he wins a second term in office.

The presidents insisted that they did not discuss Ukraine’s possible membership of a group that comprises Russia, Belarus and Kazakhstan, but which Mr Putin wants to expand into a Eurasian Union of more ex-Soviet states that could act as a counterweight to the EU.


Russian-led bloc
A lack of clarity over what was agreed at the Kremlin prompted analysts and opposition leaders to pore over the presidents’ statements, for clues as to whether Mr Yanukovich did commit Ukraine to membership of a Russian-led bloc over closer integration with the EU.

They noted Mr Yanukovich’s call for greater co-operation on creation of a “free-trade zone” between Ukraine, Russia and other ex-Soviet nations.

He also remarked on “the foundation of our joint work that has been built over decades and centuries by our people . . . our production and industrial bases, the structures of our economies. Everything that unites us . . . we should use only in an effective way, there is no alternative to this.”

For his part, Mr Putin called Ukraine “our strategic partner and ally in every sense of the word” and said the neighbouring states “could co-operate more closely in the international arena, widening co-ordination of our positions on current global problems”.

Deeper deal
To many observers, such comments seemed to allude to a deal that went far deeper than buying bonds, reducing energy prices and planning joint industrial projects.

“These are very concrete steps to move much closer to Russia. That is the choice of president Yanukovich,” said Linas Linkevicius, foreign minister of Lithuania, which holds the rotating EU presidency.

“If money is given to plug a hole, it only postpones the crisis . . . Unless the country moves towards modernisation, whatever it chooses will lead to crisis in the end.”

Catherine Ashton, the EU’s foreign policy chief, insisted that the Russia-Ukraine deal did not dash hopes that Kiev would sign an association agreement with Brussels.

“We say every few hours that we are ready to sign the agreement. The work is done. I hope Ukraine will continue to follow the path that Yanukovich assured me they want to follow,” Interfax-Ukraine news agency quoted Ms Ashton as saying.

Jailed former Ukrainian prime minister and opposition leader Yulia Tymoshenko – whose release was one of the EU’s conditions for signing the association agreement – said that “endless talks with Yanukovich are pointless”.

“It’s essential to finally impose sanctions against the regime. There needs to be a ban on them entering [the EU] and their foreign bank accounts should be frozen,” she said.