It appears that Ukraine may sell its allegiance to Russian President Vladimir Putin. Last month, Ukraine President Viktor Yanukovych decided not to sign a free trade agreement with the European Union (EU). This was hopeful news for Putin, who wants to create a Eurasian Union from the Pacific Ocean to the borders of the European Union. Yesterday, Vladimir Putin attempted to buy Ukraine’s allegiance and seal the deal on their entry into the Eurasian Union.
What did Putin offer Yanukovych? Nothing less than $15 billion in loans for Ukraine, as well as a significant discount on Russian natural gas prices.
President Yanukovych accepted the offer of aid from President Putin in Tuesday’s meeting at the Kremlin. None of the term agreements have been disclosed. However, two items are already being assumed on the heels of this announcement.
First, it can be assumed that President Yanukovych will be returning home to ample protests against his decision to join the Eurasian Union. Second, it is also understood that President Putin made the offer to cut gas prices conditional. “We believe this is a temporary decision, which means that long-term agreements should and will be signed,” Putin said after Tuesday’s meeting.
Yanukovych’s capitulation to Putin is sparking controversy in the Ukraine. For a month now, the center of Ukraine’s capital, Kyiv (Kiev), has been filled with protesters in favor of signing a free trade pact with the EU. As he was leaving for Moscow, President Yanukovych’s trip to the Kyiv International Airport was lined with protesters holding signs that read, “Yanukovych, turn back to Europe.”
In an effort to dissuade protesters Putin said he and Yanukovych did not discuss Ukraine joining the Moscow-dominated economic bloc. Protesters in Ukraine fear being pulled closer into Russia’s sphere of influence. Protesters also believe that Yanukovych has been playing both ends against the middle, regarding Russia and the EU, in an apparent search for the best possible deal. He has insisted Ukraine intended to sign the EU agreement, but he wanted to negotiate better conditions.
In fact, 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. In order to sweeten the deal and create a sense of urgency, Russian Finance Minister Anton Siluanov announced Tuesday that Russia will purchase $15 billion in Ukraine’s Eurobonds. Siluanov also said Moscow will be able to buy the first $3 billion of Ukraine’s Eurobonds this week.
Putin also said that Russia’s decision to buy the Ukrainian securities will not call on Kyiv to freeze social payments to its citizens. This was interpreted as a swipe at the International Monetary Fund, which encouraged Ukraine to reduce internal spending as a condition for providing the bailout loan.
According to Neil Shearing, the chief emerging markets economist at Capital Economics in London, Russia’s decision to buy Ukrainian securities effectively means a $15 billion financial aid package, which could be enough to avert the Ukraine’s balance of payments crisis for at least the next 18 months.
There are many questions being raised in opposition to the trade agreement and the offer of aid from Russia. Speculation surrounds the possible inclusion of Ukraine in Putin’s customs union, the Eurasian Union, which is also being promoted at this time.
Russian and Ukrainian officials said that joining Putin’s customs union was not discussed in Moscow during the one-day visit by Ukraine’s leader. However, the fact remains that six days ago Reuters reported Putin was wooing Ukraine in his recent state-of-the-union address saying, “I’m sure achieving Eurasian integration will only increase interest (in it) from our other neighbors, including from our Ukrainian partners … I hope that all political sides can successfully reach an agreement in the interests of the Ukrainian people.”
Arseniy Yatsenyuk, leader of the opposition Fatherland Party, addressed the protesters at Kyiv’s Maidan Nezalezhnosti – literally Independence Square – saying if Yanukovych signed the agreement with Russia, it would be his one-way ticket to Moscow, and joining the customs union, by implication.
Yatsenuk addressed many of the chief concerns among dissenters regarding the motivations behind Ukraine selling its allegiance to Putin, and Ukraine’s capitulation to those terms. “I know of only one place where you can find free cheese – and that’s in a mouse-trap,” said Yatsenyuk, former economy minister and opposition leader. “If Yanukovych has got $15 billion free of charge and got a reduction in gas to the sum of another $5 billion – all in all $20 billion – then we want to hear what he has given away.”
Echoing Yatsenuk, Oleg Tyagnibok, leader of the nationalist Svoboda, or Freedom, Party questioned the exact nature of the loan payback terms. “What kind of guarantee was offered for $15 billion?” Tyagnibok asked.
Another form of dissent was registered by the European Business Association, a Kyiv-based organization comprised of approximately 900 foreign and domestic businesses, which called for the Ukraine to secure loans with the International Monetary Fund.
Then, throwing more rhetorical gasoline on the political fire, opposition leader, Vitaly Klitschko, challenged Yanukovych to early presidential elections saying, “Only early elections can be a solution for the country. I am challenging Yanukovych. He is my personal rival, and I am calling him to the ring.”
Though Presidential elections are not scheduled until March 2015, the ruling Regions Party of Ukraine is already concerned about the viability of Yanukovych as a legitimate candidate for office. On Monday, Regions Party parliamentary deputies demanded a complete overhaul of the Cabinet.
The Regions Party is probably unsure of Yanukovych’s Presidential strength since their recent effort to mount street demonstrations in support of Yanukovych fizzled and backfired miserably. Although the Regions Party chartered numerous trains and buses in an attempt to shore up the public demonstrations, it was not even able to muster up 20,000 supporters, less than 10 percent the size of the opposition’s 200,000 people crowd.
In news President Yanukovych would prefer not to hear, the Kyiv Post reported that pro-Yanukovych government rally participants actually began smashing train windows and papering cars with opposition stickers. Apparently, the angry mercenaries turned on the Regions Party complaining they had been paid far less than they had been promised in order to demonstrate in support of President Yanukovych. Unfortunately for the Regions Party, it appears Ukraine may sell its allegiance to Putin, and that means the Regions Party will have more difficulty trying to buy the allegiance of Ukraine’s voters.
By Alex Durig