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 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 EU in favour of closer ties with Moscow. Russia’s bailout package angered protesters, who immediately accused Yanukovych of selling out the country to the Kremlin and pressed demands for his ouster.
Washington said the Kremlin agreements would not address concerns of the demonstrators in Kyiv, and German Chancellor Angela Merkel dismissed what she described as a “bidding competition” over Ukraine.
Putin’s move came as Ukraine said it desperately needs to get at least $10 billion in the coming months to avoid bankruptcy. The Fitch ratings agency has given Ukraine’s bonds a B-minus rating, which puts them in “junk bond” territory.
Putin sought to calm protesters in Kyiv by saying he and Yanukovych didn’t discuss the prospect of Ukraine joining a Moscow-dominated economic bloc they fear will pull their country closer into Russia’s orbit.
Yanukovych has manoeuvred 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.
But neither Putin nor Yanukovych mentioned the possibility on Tuesday, and they didn’t take questions, suggesting they were keeping their messaging tightly controlled.
Russian Finance Minister Anton Siluanov said after the Kremlin talks that Russia would purchase $15 billion in Ukraine’s Eurobonds. The money would come from Russia’s rainy day National Welfare Fund that accumulates oil and gas revenues.
Siluanov also said Moscow could buy the first $3 billion of those Eurobonds this week, Interfax reported.
Putin emphasized that Russia’s decision to buy the Ukrainian securities wasn’t contingent on Kyiv freezing 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 by about one-third from the current $400 per 1,000 cubic meters to $268.50 per 1,000 cubic meters.
Ukraine serves as a key conduit for Russian natural gas exports to Europe, and fierce gas pricing disputes between the neighbours have repeatedly resulted in supply cuts to EU customers.
Yanukovych explained last month’s decision to spike the EU agreement as necessary to improve ties with Russia, which has banned or halted imports of some Ukrainian goods and threatened more sanctions if Ukraine signs the EU pact. The EU has been cool about Ukraine’s pleas for a bailout.
Putin and Yanukovych both pledged Tuesday to boost economic and trade ties to expand the “strategic partnership” between the two neighbours.
A dozen agreements signed Tuesday included one to settle disputes in mutual trade, a deal to jointly modify a Soviet-designed transport plane, a deal on industrial co-operation and an agreement to design a bridge across the Kerch Strait.