Russia gives Ukraine financial lift

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MOSCOW -- Russian President Vladimir Putin gave Ukraine's hard-pressed government a strong financial assist in the form of a $15 billion loan and a sharp cut in the price of natural gas Tuesday, preempting European Union leaders.

With their protest encampment in Kiev, the capital of Ukraine, now in its fourth week, demonstrators demanded to know what terms President Viktor Yanukovych had agreed to during his one-day visit to the Kremlin to land such a deal.

Vitali Klitschko, the former boxer who heads the opposition UDAR party, said in an address to protesters Tuesday evening that he believes that Mr. Yanukovych secured the loan with Ukrainian property -- perhaps the natural gas pipeline network -- as collateral.

"Only early elections can be a solution for the country," Mr. Klitschko said. "Yanukovych told us at the roundtable [Friday] that he is not afraid of early elections. I am challenging Yanukovych -- he is my personal rival, and I am calling him to the ring."

The risk to Mr. Putin from Tuesday's move is twofold: He has potentially embroiled Russia in both Ukraine's tottering economy and its political passions.

The two countries also signed a package of lesser trade accords, amid agreement that they need to reduce trade barriers. Afterward, Mr. Yanukovych said, "I will say openly: I know that this work wouldn't have been done at this optimal speed if not for the Russian president's political will."

The conditions of the loan were not disclosed. Mr. Putin said the drop of about 33 percent in the price of gas might be temporary.

Ukraine, heading for financial straits, has been bobbing and weaving between the European Union and Russia. Tuesday's deal lifts some of the immediate financial pressure but does not appear to be a clear signpost for Ukraine's future. Both sides said the two presidents did not discuss whether Ukraine might join Mr. Putin's new Eurasian Customs Union.

The key question will be whether Ukraine keeps talking to the EU about new terms for a trade pact, or whether its recently renewed negotiations with the bloc were merely a ploy to get Mr. Putin's attention.

A desire to side with Europe is what drew the protesters out in late November, and Tuesday's development could see the domestic pressure on Mr. Yanukovych mount. Week after week, hundreds of thousands have turned out to protest his decision to back off on the deal with the EU, and the demands that he and his government resign have escalated, even as the government resumed talks with sometimes-exasperated EU officials in Brussels.

The protesters are deeply suspicious of Russia and of Mr. Yanukovych's real intentions. When Mr. Putin's name came up at a rally Sunday in Kiev, it was met with jeers and derisive whistles. On Tuesday, as reported by the Kyiv Post, a group of women showed up at the Russian Embassy to deliver pumpkins -- a traditional Ukrainian way of declining a marriage proposal.

About 30 percent of Ukraine's trade is with Russia, and a similar amount is with the EU. Certain sectors of the Ukrainian economy would be hurt by a deal with Europe if Russia erected trade barriers in response, which Moscow has vowed to do. But Ukraine's main business oligarchs are not eager to see their country succumb fully to Russia's embrace, for fear that their companies would fall to Russian raiders.

Ukraine pays about $400 per thousand cubic meters of gas, one of the highest prices in Europe, and is contractually obliged to buy a minimum amount. On Tuesday, Mr. Putin cut the price to $268.50. It was not clear whether the minimum stays in place. The $15 billion loan, denominated in euros, comes from Russia's rainy-day fund.

Early in the day, analysts speculated that Ukraine might make it easier for Russia to ship gas across its territory to Europe, or perhaps give Russia a freer hand at its naval base in Sevastopol, in Ukraine's Crimean Peninsula. But no such details were available after the presidents' meeting.

Before the meeting, Mr. Putin noted that trade between Ukraine and Russia had dropped 11 percent in 2012 and was down 15 percent in this year's first nine months -- some of that because of customs slowdowns and sanitation-related hold-ups imposed by Russia when it appeared that Mr. Yanukovych would sign on with Europe. Mr. Putin said it is important for the two countries "to reverse this negative trend."



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