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The Boston Globe


Russia offers Ukraine a financial lifeline

Putin deals blow to US, Europe in influence contest

Ukraine’s president, Viktor Yanukovych, winked at Vladimir Putin during a signing ceremony at the Kremlin.

Sergei Karpukhin/Reuters

Ukraine’s president, Viktor Yanukovych, winked at Vladimir Putin during a signing ceremony at the Kremlin.

MOSCOW — Playing a trump card in his diplomatic contest with the West over Ukraine, President Vladimir Putin said Tuesday that Russia would come to the rescue of its financially troubled neighbor, providing $15 billion in loans and a sharp discount on natural gas prices.

It was a bold and risky move by Russia, given the political chaos in Ukraine, where thousands of antigovernment protesters remain encamped in Independence Square in Kiev, the capital. For the moment, however, Putin seemed to gain the upper hand over Europe and the United States in their contest for influence.

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There was no discussion of what Russia might receive in return for its aid. Protesters in Kiev have been deeply worried that President Viktor Yanukovych would cut a secret deal to join a customs union that Russia has established with Belarus and Kazakhstan. That would largely preclude any possibility of reviving the accords with Europe, but Putin said the subject had not come up.

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!”

Leaders of the three opposition parties who are coordinating the protest said the demonstrations would continue. They also voiced suspicions about what Yanukovych 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 — a tired and haggard lot now after 17 days of occupying the square, with a tent encampment and fires burning in barrels to keep people warm.

Yatsenyuk asked the protesters to persevere, and said he was sure they would not give up. Addressing the Russian president, he said, “Dear Vladimir Vladimirovich, this time you mistook my people for yours.”

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Yanukovych, whose political fortunes have appeared bleak in recent days, praised Putin’s leadership.

“I will say openly: I know that this work wouldn’t have been done at this optimal speed if not for the Russian president’s political will,” he said.

While the implications for the protest movement were not immediately clear, Putin’s announcement, at a meeting at the Kremlin with Yanukovych, substantially alters the political landscape. It throws Yanukovych an economic and political lifeline that will spare him for now from negotiations with the International Monetary Fund, Europe, or the United States.

Putin said the money to aid Ukraine would come from Russia’s hefty reserve funds, and that the price of gas sold by Gazprom, the state-controlled energy behemoth, would be dropped to $268.50 per 1,000 cubic meters — less than the $380 Western Europe pays for Russian gas — from between $395 and $410, saving Ukraine $2 billion a year.

For Putin, outmaneuvering the effort by European leaders to draw Ukraine westward is the latest in a string of deft foreign policy moves that have served to reestablish Russia as a major power. These include Russia’s proposal to disarm Syria of chemical weapons, which precluded a US military strike.

At the same time, Putin’s ability to announce a major bailout of Ukraine highlighted the contrasts with the West, where a rescue plan on such a scale would typically require protracted debate and negotiation. In Russia, it is a decision that Putin, in consultation with a close coterie of aides, can make.

But there are risks for Russia in the deal, and the possibility remains that Putin may come to regret his decision. Should the Ukrainian economy continue to deteriorate, the country might find itself facing default again in the not-to-distant future, experts say, confronting Putin with an even larger headache. The exposure of Russian banks and other businesses to the Ukrainian economy is estimated at some $40 billion.

But those potential problems were not on the agenda Tuesday in Moscow, where Putin stressed the differences in approach between Russia and the West, which he often accuses of meddling.

“With the goal of supporting the budget of Ukraine, the government of the Russian Federation made the decision to issue in bonds from the Ukrainian government part of its own reserves from the National Welfare fund in the amount of $15 billion,” Putin said, seated next to Yanukovych.

It was not immediately clear whether Russia’s investment in Ukrainian debt would be legal, under Russia’s own requirements for the management of its sovereign funds.

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