Putin: Russia to buy $15 billion in Ukraine bonds
Russian President Vladimir Putin, right, and his Ukrainian counterpart Viktor Yanukovych chat during a news conference after their talks in Moscow on Tuesday. Russian President Vladimir Putin says Moscow has agreed to sharply cut the price of its natural gas supplies to Ukraine and will buy $15 billion worth of Ukrainian government bonds, but says there was no discussion about Ukraine joining a free trade pact of three ex-Soviet nations. AP photo
MOSCOW — Russian President Vladimir Putin on Tuesday opened his wallet in the battle with the European Union over Ukraine’s future, saying Moscow will buy $15 billion worth of Ukrainian government bonds and sharply cut the price of natural gas for its economically struggling neighbor.
The announcements came after Putin held talks in Moscow with Ukrainian President Viktor Yanukovych, who is facing massive protests at home for his decision to shelve a pact with the EU in favor of closer ties with Moscow. Russia’s bailout package angered protesters, who immediately accused Yanukovych of selling out to the Kremlin and pressed demands for his ouster.
Putin’s move came as Ukraine said it desperately needs to get at least $10 billion in the coming months to avoid bankruptcy.
Yanu-kovych has maneuvered between Russia and the EU in an apparent search for the best possible deal. He has insisted Ukraine intends to sign the EU agreement but wants to negotiate better conditions. Neither Putin nor Yanukovych mentioned the possibility on Tuesday. Russian Finance Minister Anton Siluanov said after the Kremlin talks that Russia would purchase $15 billion in Ukraine’s Eurobonds.
Putin said the Russian state-controlled gas monopoly, Gazprom, will cut the price that Ukraine must pay for Russian gas deliveries by about one-third from the current $400 per 1,000 cubic meters to $268.50 per 1,000 cubic meters.
Russia’s decision to buy Ukrainian securities effectively means a $15 billion financial aid package, which could be enough to avert a balance of payments crisis for the next 18 months, according to an estimate by Neil Shearing, the chief emerging markets economist at Capital Economics in London. He said in a note to investors that the gas price cuts could reduce Ukraine’s current account deficit by around $4.5 billion a year. Tim Ash, emerging markets analyst from Standard Bank in London, said that it remains unclear what conditions Putin placed for the generous aid.
“I cannot imagine that Putin suddenly felt very generous,” he said. There will be a tough set of requirements that “either permanently breaks the link with the EU ... or ensures Russia’s control over gas supply/transit.”