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Putin woos Ukraine President with €11 billion bond deal

The deal is aimed at encouraging Ukraine to shelve a pact with the EU and build closer ties with Russia.

Putin and Yanukovych in Moscow today.
Putin and Yanukovych in Moscow today.
Image: Ivan Sekretarev/AP/Press Association Images

RUSSIAN PRESIDENT VLADIMIR Putin opened his wallet today in a bid to win his long-running battle with the European Union over Ukraine’s future, saying Moscow would buy €11 billion worth of Ukrainian government bonds and sharply cut the price of natural gas for its economically struggling neighbour.

The announcements came after Putin held talks in Moscow with Ukrainian President Viktor Yanukovych, who is facing massive protests at home for his decision to shelve a pact with the EU in favor of closer ties with Moscow. Russia’s bailout package angered protesters, who immediately accused Yanukovych of selling the country out to the Kremlin and pressed demands for his ouster.

Washington said the Kremlin agreements would not address concerns of the demonstrators in Kiev and German Chancellor Angela Merkel dismissed what she described as a “bidding competition” over Ukraine.

Putin’s move came as Ukraine said it desperately needs to get at least €7.2 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.

Putin sought to calm protesters in Kiev by saying he and Yanukovych didn’t discuss the prospect of Ukraine joining a Moscow-dominated economic bloc they fear will pull their country closer into Russia’s orbit.

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The protests continue in Kiev today [Ivan Sekretarev/AP/Press Association Images]

Yanukovych has maneuvered between Russia and the EU in an apparent in a search for the best possible deal. He has insisted Ukraine still intends to sign the EU agreement, but wants to negotiate better conditions.

But neither Putin nor Yanukovych mentioned the possibility today and they didn’t take questions, suggesting they were keeping their messaging tightly-controlled.

Russian Finance Minister Anton Siluanov said after the Kremlin talks that Russia would purchase €11 billion in Ukraine’s Eurobonds starting this month. The money will come from Russia’s rainy day National Welfare Fund which accumulates oil and gas revenues.

Putin emphasized that Russia’s decision to buy the Ukrainian securities wasn’t contingent on Kiev freezing social payments to its citizens — a clear jab at the International Monetary Fund, which has pushed Ukraine to reduce spending as a condition for providing a bailout loan.

Read: “America stands with you,” John McCain tells Ukraine protesters

Explainer: What exactly is going on in Ukraine? >

Read: Demonstrators topple Lenin statue in giant Ukraine protest >

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Associated Press

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