MOSCOW – Russian President Vladimir Putin upped the stakes Tuesday in the battle over Ukraine’s future, saying Moscow will buy $15 billion worth of Ukrainian government bonds and sharply cut the price of natural gas heading to its economically struggling neighbour.
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 European Union in favour of closer ties with Moscow.
Economic experts say Ukraine desperately needs to get at least $10 billion in the coming months to avoid bankruptcy.
While Putin sought to calm the protesters in Kyiv by saying that he and Yanukovych didn’t discuss the prospect of Ukraine joining the Russian-dominated Customs Union, the sweeping Kremlin agreements are likely to fuel the anger of demonstrators who want Ukraine to break from Russia’s orbit and integrate with the 28-nation EU.
Russian Finance Minister Anton Siluanov said after the Kremlin talks that Russia would purchase $15 billion in Ukraine’s Eurobonds starting this month.
Putin emphasized that Russia’s decision to buy the Ukrainian bonds wasn’t contingent on that government freezing any social payments to its citizens — a clear jab at the International Monetary Fund, which has pushed Ukraine to reduce spending as a condition for providing a bailout loan.
Putin said the Russian state-controlled gas monopoly, Gazprom, will cut the price that Ukraine must pay for Russian gas deliveries to $268 per 1,000 cubic meters from the current level of about $400 per 1,000 cubic meters.
Yanukovych explained his decision to spike a landmark association agreement and free trade pact with the EU last month by his belief that Ukraine needs to improve ties with Russia. His move has sparked massive demonstrations in Kyiv demanding his ouster.
Moscow has strongly opposed the Ukraine-EU deal and sought to thwart it with a mixture of economic threats and promises.