Russia will wait until Ukraine forms a new government before honoring agreements to reduce natural gas prices and channeling the remainder of a $15 billion rescue package to its neighbor, President Vladimir Putin said.
Ukraine’s request to defer payments on gas it’s importing at a discount this year “seriously changes the situation and should be taken into account as relations are built with a new government,” Prime Minister Dmitry Medvedev said at a cabinet meeting attended by Putin outside Moscow today. “Even at reduced prices, they tell us that they can’t pay.”
The stance leaves Ukrainian President Viktor Yanukovych in suspense over Russia’s commitment as he struggles to contain nationwide street protests that led to yesterday’s departure of his loyalist prime minister, Mykola Azarov. Deputy Prime Minister Serhiy Arbuzov is acting as premier, while the cabinet will stay on until Yanukovych names a replacement.
Ukraine sealed $15 billion of Russian financing and a one-third gas-price discount ofter talks last month between Yanukovych and Putin. Russia, which agreed to cut the price it charges for natural gas to $268.50 per 1,000 cubic meters, hasn’t added to the $3 billion it plowed last year into Ukraine’s government debt from its National Wellbeing Fund, according to Finance Minister Anton Siluanov.
Unrest in Ukraine was ignited by Yanukovych’s decision in November to snub an association agreement with the European Union in favor of closer ties with Russia. Anti-protest legislation passed this month and repealed yesterday also backfired by triggering violence at a Jan. 19 demonstration.
Putin told Medvedev to remain in contact with Ukrainian officials and said “it’s reasonable” to wait until a new cabinet emerges. Talks with the new government will be held as soon as it’s approved, First Deputy Premier Igor Shuvalov said.
“For these plans to be executed in full, it’s appropriate to wait until a new government is formed,” Shuvalov said. “We’ll immediately hold consultations with these comrades and carry out your instructions fully.”
Putin said yesterday Russia will follow through with the bailout even if the opposition comes to power in Kiev, while making that support contingent on Ukraine’s “future economic strategy.” Speaking in Brussels after talks with top EU officials, the Russian leader indicated that he would tolerate politicians with a pro-western bent if the two neighbors remain committed to developing economic cooperation.
Since obtaining the aid, Ukraine’s government has vowed to raise the minimum wage, increase child benefits and boost public paychecks three times this year. The pledges contrast with conditions on a potential bailout from the International Monetary Fund, which had demanded Ukraine cut heating subsidies and spending to shore up it public finances.
After receiving part of the Russian rescue with the disbursement of $3 billion through two-year Ukrainian sovereign Eurobonds last month at a 5 percent yield, the government planned to sell an additional $2 billion in notes to Russia, Ukrainian First Deputy Finance Minister Anatoliy Myarkovskyi said Jan. 22.
While more than half of Ukrainians had backed an EU trade and association pact that Yanukovych snubbed in November, the Russian deal is supported by 47 percent of the population compared with 28 percent who oppose it, a poll by the Razumkov Center and Democratic Initiatives Foundation in Kiev showed. Bloomberg