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Moscow talks help Ukraine avoid default, expert opinions differ on long-term effects

December 18, 2013, 16:36 UTC+3 Zamyatina Tamara
© ITAR-TASS/Mikhail Klimentyev

MOSCOW, December 18. /ITAR-TASS/. The Kremlin agreed to disburse a 15 billion dollar loan to Ukraine and reduce a price for Russian gas deliveries by third as a result of the three-hour talks between the two countries’ leaders Vladimir Putin and Viktor Yanukovich on Tuesday. Brussels offered Ukraine one billion dollars for “adaptation” in the event of signing an association agreement with the European Union.

The results of the Putin-Yanukovich talks allow Ukraine to avoid an approaching default and postpone the dilemma of foreign policy choice. It is worth noting that Russia has provided financial assistance to Ukraine without bargaining on its accession to the Customs Union of Russia, Belarus and Kazakhstan, what pro-European supporters feared in Kiev. “We have not even touched on this theme,” Putin said.

Assessing the talks between Putin and Yanukovich, experts give credit for the Russian president’s political will. Some of them lament whether it is necessary to unseal the National Welfare Fund for the sake of stretching out a helping hand to other country.

Valentin Badrak, head of Kiev’s Research Centre for the Army, Conversion and Disarmament Problems, told Nezavisimaya Gazeta that the talks between Putin and Yanukovich “reflected the struggle between the West and Russia for geopolitical influence on Ukraine that is of strategic importance for both of them.”

“Moscow acts more decisively and actively uses its economic and information leverages. The West places a focus on politics, values and ideology,” the expert said.

“The National Welfare Fund is designed to resolve Russia’s pension problems in the future, but its funds are being invested into risky assets,” said Alexander Morozov, chief economist for Russia and the CIS at HSBC Holdings Plc. “Russia’s assistance will only stave off the threat of a default within the upcoming two years, but will not tackle Ukraine’s problems.”

“Russia’s financial aid lowers the risk of Ukraine’s debt crisis, $15 billion is enough to plug a hole in the balance for approximately 18 months,” said analysts of one of the world’s leading macro-economic research companies Capital Economics. “However, Ukraine’s movement towards Moscow away from the European Union will cause a new wave of street protests and will throw the country into even deeper political crisis.”

Vyacheslav Nikonov, a famous expert in international relations and State Duma deputy from the ruling party United Russia, shares a similar opinion, describing the results of the talks between Putin and Yanukovich as “huge success for Ukraine and first of all, for Russia.”

“After the Putin-Yanukovich meeting Russia and Ukraine will start eliminating trade barriers, which will increase the two countries’ GDP and boost trade,” Nikonov said in an interview with Itar-Tass. “For many years Ukraine has been in the top five of Russia’s biggest trade partners, sometimes it even ranked third in the trade turnover.”

“As for lower price for Russian gas deliveries to Ukraine, this circumstance will “feed” Ukrainian enterprises and people,” the expert said. “Moreover, once Gazprom wanted to bypass Ukraine as a transit country for Russian gas, but now Kiev would become a reliable partner in gas transit. This will help boost gas deliveries to Europe and Ukraine.”

“A $15 billion credit line is helpful for Kiev,” Nikonov continued. “Ukraine itself will set interest rates for the loan under Ukrainian bonds, what will help the country to resolve its budget problems. It is better for Russia to deposit money at high interests in a friendly country than to keep $160 billion at practically zero interests in the United States.”

The expert welcomed deals on military cooperation between Moscow and Kiev. “A huge number of Russia’s defense systems are jointly manufactured with Ukraine. Almost the whole missile and nuclear shield of the Soviet Union was built on the territory of Ukraine,” he said. “Thus, enhancing its defense cooperation with Ukraine, Russia will avoid huge additional expenses on defense production at home, while Ukrainian defense plants will get orders worth 23 trillion rubles, of what Vladimir Putin has spoken.”

“The main thing is that Russia showed itself in relation to Ukraine as an honest power, transparent in its foreign policy,” Nikonov added. “The European Union for Ukraine’s delusive association twisted that country’s arms, publicly humiliated its leaders and demanded the signing of the deal on enslaving terms. For its tiny loan the EU promised Ukraine just a bright future ahead alongside with same-sex marriages. From the moral and ethic point of view Russia conducts itself much better than the European Union. Russia does not lay down for Ukraine any terms in exchange for its assistance and does not hurt sovereignty of an independent state.


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