Ukraine borrows $2 bln from Moscow, signals bailout on track
* Adds to December Eurobond, total borrowed now $5 bln
* One third of Russian bailout disbursed
* Violence has prompted speculation about aid from Moscow
KIEV, Jan 27 (Reuters) - Ukraine is borrowing another $2 billion from Russia on the same terms as a $3 billion Eurobond sold in December, in a sign that Moscow is pushing on with a $15 billion bailout despite concern about violence at anti-government protests in Kiev.
Perhaps Russia is not as concerned as some of us might think?
In a geopolitical battle with the European Union after Ukraine spurned a trade pact with the 28-state bloc, Russia agreed on credits and cheaper gas for Kiev in December to help its fellow former Soviet republic meet huge debt payments.
The Ukrainian government said in a statement on Monday it was issuing $2 billion in Eurobonds to Russia on the same terms as in December, bringing the total amount borrowed - over two years at an interest rate of 5 percent - to $5 billion.
Financial analysts said the statement sought to signal that all is well with the bailout, intended to help Kiev cover external debt repayments of $8 billion this year and boost depleted central bank reserves.
"This is a kind of verbal intervention to partially or completely calm people," said Oleksandr Valchishen of InvestCapital Ukraine, "to appease business and people who could move a lot of money, put pressure on the hryvnia."
Olena Belan, of Dragon Capital, said: "Russia is continuing to support Ukraine because this was the agreement."
In Moscow, the Kremlin and Finance Ministry did not immediately comment. But, signalling Russia is not having second thoughts about the bailout, a government source said: "The help will be extended."
Another government official said, however, it was not clear when Moscow would make the purchase of the further $2 billion.
Underlining that the bailout is as much as political decision as a financial move, the source said: "It's not the Finance Ministry's decision. It is the Kremlin's decision."
President Vladimir Putin said in December the bailout was an act of brotherly love for Russia's fellow Slavs in Ukraine. He denied it was a way to keep Ukraine out of the EU's clutches in a tug-of-war over the country of 46 million which is a large trading market and is rich in mineral resources.
Russia regards Ukraine as part of its traditional sphere of influence and the deal was widely seen in Moscow as a victory for Putin that kept Kiev in its orbit.
Since then at least six people have been killed in clashes, according to the prosecutor's office and medics, and the crisis has deepened tension between Russia and the West.
Uncertainty about the fate of the Ukrainian government has mounted because Yanukovich has offered important posts to the opposition, including the role of prime minister.
The thought of the opposition joining the government in Kiev is alarming for Russia because its leaders say they would "take the country into the European Union".
Russian Foreign Minister Sergei Lavrov expressed concern last week that the situation in Kiev was spinning out of control and warned European governments not to meddle in Ukraine.
Russian business daily Vedomosti quoted an unnamed Russian official as saying Moscow would "review the situation" if the political risks in Ukraine grew.
But Putin has said nothing in public of the violence - Russia's options are limited and Vedomosti's source said there had been no discussion of halting credits to Kiev.
Dmitry Peskov, Putin's spokesman, told Russian newspaper Komsomolskaya Pravda last week that Moscow was watching events closely and sometimes with pain but added: "Interfering in (Ukraine's) internal affairs is for us unacceptable."
A presidential aide, Yuri Ushakov, said contacts with the Ukrainian government were continuing at the top level but declined to give details.
Ukraine’s Revolution Fueled by International Energy Politics
Isn't it energy politics that factors into every destabilization/revolution/overthrow/whatever?
Denial of energy. Access to energy. Controlling the energy. Controlling the means of transport?
I am hard pressed to think of anything unrelated to energy politics. You?
|Russian President Vladimir Putin (R) and his Ukrainian counterpart Viktor Yanukovych attend a ceremony celebrating Navy Day in Sevastopol on July 28, 2013|
Ukraine’s revolution is fueled by international energy politics. The revolution that has engulfed the country resulted mainly from opposition to President Viktor Yanukovich’s decision to develop closer economic relations with Russia. The two countries have a unique relationship as their respective populations share a similar language, ethnicity, history and of course, a national border. However, the two countries share something much more meaningful in today’s global world: complex energy relations.
Something that has been discussed here previously. ht Gallier2. The EU and the sanctioning of Iran has seen the EU cut of it's nose to spite it's own face. But then the EU policy comes straight out of Washington, so what can be expected?
Russia is currently the world’s second largest exporter of natural gas. A large portion of its hydrocarbons are imported by Western Europe, which is heavily dependent on the pipelines that traverse Ukraine. Governments of Western Europe for years have tried unsuccessfully to lessen their dependence on Russia’s state owned Gazprom. The pipeline infrastructure established in the region is largely a result of Soviet era industrial planning, meaning that the oil and natural gas of countries such as Turkmenistan and Kazakhstan gets shipped directly through Russia when being sent to European customers. Gazprom for its part charges fluctuating transport fees.
When Yanukovich was deciding whether or not to sign a free trade agreement with the European Union, Russia threatened to raise the prices of its energy exports to Ukraine. Ukraine, already reliant on Russian energy, was even more so inclined to accept a Russian deal because of the approaching winter. What resulted in December was Gazprom agreeing to sell natural gas to Ukraine’s Naftogaz for $268.50 per 1,000 cubic meters instead of at the original price of roughly $400 per 1,000 cubic meters. Russia also handed Ukraine a $15 billion bail out package, with Yanukovich agreeing to use some of the funds to buy Russian hydrocarbons.
This is why Ukraine’s revolution is fueled by international energy politics. The European Union has thrown its support behind the opposition, largely in hopes that a change in leadership will allow Ukraine to remove itself from Russia’s sphere of influence. A pro-Western Ukraine will allow the European Union more power when bargaining with Gazprom over prices. Remember, the European Union currently does not buy oil or gas from Iran due to international sanctions. That being the case, Western Europe’s economy has become further subject to Gazprom’s dominance.
Russia, for its part, wants to maintain the status-quo. Following the economic disaster that plagued the country following the collapse of the Soviet Union, hydrocarbon exports have become essential to Russia’s economy. Russian politicians have made known their support for Yanukovich’s government fearing that unrest in Ukraine would be bad for business. Gazprom suffered a 10.5 percent decrease in profits in 2013’s financial third quarter. Although the company did not publically disclose reasons behind the loss, it can be inferred that it was due at least in part to Ukraine’s cutback in purchases and its debt of $2.7 billion to Gazprom.And the EU leadership is so stupid, so subservient to Washington it will gleefully make life difficult for Europeans as well as Ukrainians.
That is a possible reason Russia offered Ukraine a deal it could simply not refuse. Cheaper energy costs would benefit Ukraine’s already struggling economy and Ukraine’s compliance would allow Gazprom to maintain its control on European markets. However, the people of Ukraine were not pleased with what was perceived as Russian bullying. Yanukovich’s agreement with Russia sparked protests that have since turned into the Ukrainian revolution. It is therefore ironic that protesters using Molotov cocktails against police most likely rely on Russian gas.
Europe has given its support to the opposition not so much because it views police crackdowns and anti-protests laws as contradictory to human rights, but rather because this is an opportunity to change the geo-political balance of power. Ukraine’s revolution belongs to the people, but is fueled by these international energy politics. As Russia and the European Union compete for power, Ukraine will continue to be ground zero.