Russia agrees deal to buy Ukrainian debt and cut gas prices
Russia threw Ukraine an economic lifeline yesterday, agreeing to buy US$15 billion of Ukrainian debt and to reduce the price its cash-strapped neighbour pays for vital Russian gas supplies by about one-third.
The deal, reached at talks in Moscow between the Russian and Ukrainian leaders, is intended to help Ukraine stave off economic crisis though Moscow will hope it keeps Kiev in its political and economic orbit.
The deal could also fuel protests against Ukrainian President Viktor Yanukovych, who faces accusations of "selling" Ukraine to the highest bidder after spurning a trade deal with the EU before turning to Moscow for help.
Finance Minister Anton Siluanov said Russia would tap a National Welfare Fund - a rainy day fund - and use the US$15 billion to buy Ukrainian eurobonds.
The deal boosted the price of Ukraine's dollar debt, a sign of investors' confidence.
Announcing the deal after talks with Yanukovych, President Vladimir Putin said Russia would help Ukraine through its problems as big debt repayments loom but that there had been no discussion of Kiev joining a Russia-led customs union.
"The Russian government has made the decision to convert part of its reserves from the National Welfare Fund into Ukrainian securities. The volume is US$15 billion," Putin said. Ukraine's Naftogaz energy company will pay Russia's Gazprom US$268.5 per 1,000 cubic metres of natural gas. The previous price had been about US$400 per 1,000 cubic metres.