Russia Boosts Ukraine Economy with $15 Billion Loan
Over the past month, Ukraine has faced its largest series of anti-government protests since the Orange Revolution in 2004, where thousands of citizens protested what appeared to be a corrupt and fraudulent presidential election. This series of protests are not the result of election fraud, but rather outrage against current president Viktor Yanukovych and his decision to not sign the Association Agreement with the EU, an agreement that would cement a cooperative relationship between EU member-states and the non-EU state of Ukraine.
On Tuesday, protesters were given even more fuel to add to their ire as Russian president Vladimir Putin agreed to give Ukraine $15 billion in order to help bolster their struggling economy. As it currently stands, Ukraine has $9 billion in sovereign debt to repay by the end of 2014.
The $15 billion was not the end of the agreement, however. Putin also stated that Gazprom, Russia’s state-controlled energy service, would reduce the price of gas sold to Ukraine from $400 per 1,000 cubic meters to $268.50. This deal may be just as important as they $15 billion seeing as winters in Ukraine are harsh and the grand majority of their gas comes from Russia.
Much of the apprehension created in potentially signing the Association Agreement with the EU stemmed from the fact that much of Ukraine’s economy is dependent upon goods and services being exchanged with Russia. Throughout this ordeal, Russia has coerced Ukraine into siding with them through imposed sanctions and future threats of withholding crucial goods to Ukraine, such as natural gas.
While this $15 billion deal will do wonders toward helping Ukraine repair its economic woes, many citizens in Ukraine are still calling for new leadership. The protesters do not want Ukraine to devolve back to the days of Ukraine being a Soviet satellite-state, but rather want the country to become more integrated into Western Europe and seek its own autonomy.
The protesters also fear what caveats come with the agreement between Yanukovych and Putin, despite Putin’s claim that “… this is not tied to any conditions … I want to calm you down – we have not discussed the issue of Ukraine’s accession to the customs union at all today.”
Vitali Klitschko, head of the opposition Udar party, parliament member, and former WBC heavyweight champion, has publicly voiced his frustrations with this agreement, stating, “We are sure that everything is already decided: that Yanukovych will bring quite good loans, financial support, a new gas price. The question is, in exchange for what?”
Most Ukrainians would likely suspect that the cost of this agreement will be that Ukraine will have to join Russia’s newly founded customs union, Russia’s response to the EU. If this is the case, Ukraine will likely not see stability for quite some time. Police have been unable to move protesters from Independence Square, and Parliament has been unable to resume duties due to being blocked by said protesters. The vehemence of the opposition movement, coupled with the facts that Yanukovych has stated that “Ukraine’s trade with Russia makes it impossible for us to act in any other way. There is no alternative to this,” and that the IMF and EU were not able to come up with the $20 billion Ukraine said it would need to support their economy once in a relationship with the EU, makes the stalemate unlikely to change anytime in the near future.
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