Russia dangles carrot of loan for Ukraine

Pressure continues to mount on president Viktor Yanukovich after spurning EU trade deal

A Kremlin aide made clear today that Russia was ready to extend a credit to Ukraine to help Kiev cope with its economic problems and keep the country in Moscow's orbit.

Economic adviser Andrei Belousov said it was possible that a credit could be agreed at talks tomorrow between Russian president Vladimir Putin and Ukrainian president Viktor Yanukovich, who has turned to Moscow for help after spurning a free trade deal with the European Union last month.

"I do not rule out that, if there is a request, a credit could be provided (to Ukraine)," Interfax news agency quoted Ms Belousov as saying.

“The situation in Ukraine is now such that without loans, from one side or another, they will simply fail to maintain economic stability.”


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.

Mr Belousov did not say how much Russia might be ready to loan Ukraine.

Mr Yanukovich has faced street protests since Kiev's U-turn away from Europe, but Ukrainian officials have made clear they do not think the EU is prepared to come up with enough money to help Ukraine through its economic difficulties.

The EU yesterday suspended work on the trade and political pact it has been negotiating with Ukraine, and has accused Russia of putting heavy pressure on the former Soviet republic not to move closer to the EU.

But Mr Yanukovich has not said whether he will bow to Russia's calls to take his country into a Moscow-led customs union with Belarus and Kazakhstan.

Apart from loans, Ukraine is seeking a lower price for Russian gas - now at around $400 per 1,000 cubic metres - to help it cope with its debt burden.

Ukrainian prime minister Mykola Azarov was quoted as saying yesterday that he hoped a deal on a cheaper price for gas deliveries would be concluded.

British foreign secretary William Hague today sent a message of support for the Kiev demonstrators, telling them he shares their vision of closer ties for their country with the European Union.

Writing in the Daily Telegraph, Mr Hague said: “It is inspiring to see these people standing up for their vision of the future of Ukraine: a free, sovereign, democratic country with much closer ties to the European Union and a positive relationship of mutual respect with Russia. This is a vision I share.”

Mr Hague said he was “frustrated” at Mr Yanukovych’s decision not to sign the association agreement at a summit last month in the Lithuanian capital, Vilnius.

“Since the end of the Cold War, Britain has been the leading voice supporting the enlargement of the EU to countries of Central and Eastern Europe, and closer ties with other eastern neighbours. We hold to that vision,” he said.