Russia Offers Ukraine Lifeline

December 18, 2013 by staff

Russia Offers Ukraine Lifeline, In a sharp rebuff to the West in the diplomatic wrangle over Ukraine, President Vladimir V. Putin said Tuesday that Russia would come to the rescue of its financially troubled neighbor, providing $15 billion in loans and a steep discount on natural gas prices.
Protesters remained at Independence Square in Kiev, Ukraine.

It was a bold but risky move by Russia, given the political chaos in Kiev, the Ukrainian capital, where thousands of demonstrators remain encamped in Independence Square, protesting their government’s failure to sign political and free-trade accords with Europe.

For the moment, however, Mr. Putin seemed to gain the upper hand over Europe and the United States in their contest for Ukraine, a former Soviet republic of 46 million that Russia sees as integral to its economic and security interests. It is by far the region’s most populous and influential country that has remained outside the European orbit.

For Mr. Putin, the jousting over Ukraine is the latest of several foreign policy moves that have served to re-establish Russia as a counterweight to Western dominance of world affairs. This year, he defied Washington by granting temporary asylum to Edward J. Snowden, the former National Security Agency contractor, and deflected an American military strike on his longtime ally, President Bashar al-Assad of Syria, with a proposal to eliminate Syria’s chemical weapons.

There was no immediate quid pro quo for Russia – at least not in plain sight – as Mr. Putin announced the deal at the Kremlin with Ukraine’s embattled president, Viktor F. Yanukovich. Protesters in Kiev have been deeply worried that Mr. Yanukovich would cut a secret deal to join a customs union that Russia has established with Belarus and Kazakhstan. The union is essentially a free-trade zone across a large section of the former Soviet Union, allowing goods to cross travel through borders without clearing customs.

Over the weeks of protests, however, it became clear that the customs union was a nonstarter for Ukraine, and Mr. Putin said the subject did not come up in their discussions on Tuesday.

In Independence Square, where the large crowd was bolstered by people coming out of work, the initial reaction appeared to be a mix of fury and dismay, with people chanting, “Out with the crook!” But there was no call for drastic new steps.

Leaders of the three opposition parties who are coordinating the protest said the demonstrations would continue, and they voiced suspicions about what Mr. Yanukovich had offered in exchange for a Russian bailout.

“Free cheese is only found in a mousetrap,” Arseniy P. Yatsenyuk, the leader of the Fatherland coalition in Parliament, said in a speech. He asked for the patience of protesters.

The implications for the protest movement were not immediately clear, but Mr. Putin’s announcement, at a Kremlin meeting with Mr. Yanukovich, substantially alters the political landscape. It throws Mr. Yanukovich an economic and political lifeline that will spare him for now from negotiations with the International Monetary Fund, which was demanding significant changes to the government, judiciary and the economy in exchange for aid.

While Mr. Putin portrayed Russia’s assistance as a gallant move, requiring Ukraine neither to commit to the customs union nor to put in place any of the austerity measures demanded by the I.M.F., the rescue plan carries serious long-term economic and political risks. Experts say that unless Ukraine carries out overhauls, including increases in household utility rates, limits on government spending and pension increases, and improvements in the business climate, the country’s economic problems will continue, raising the likelihood that the aid will be wasted.