Ukraine borrows $2 billion from Moscow, signals bailout on track

(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.

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 deal brought a breathing space for the government but the protests have since spiraled into violent unrest in the capital and other cities, forcing President Viktor Yanukovich into talks with opponents who mistrust Moscow.

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, signaling 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.”

 

Reuters has the full article

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