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Ukraine bankrupt without 'historic' Moscow deal: PM

Ukrainian opposition supporters wave torches and phones during a rally on Independence Square in Kiev, early on December 18, 2013
Ukrainian opposition supporters wave torches and phones during a rally on Independence Square in Kiev, early on December 18, 2013

Ukraine's prime minister on Wednesday defended a deal with the Kremlin that the opposition decried as a sellout to Russia, saying that Kiev had avoided bankruptcy and social collapse thanks to the "historic" bailout.

Prime Minister Mykola Azarov said the agreement clinched between President Viktor Yanukovych and his Russian counterpart Vladimir Putin on Tuesday was the only way to rescue the economy after five consecutive quarters of negative growth.

A proposed Association Agreement with the European Union -- whose shelving by the government sparked a month of mass protests in Kiev -- would only have dragged the country further into the mire, he said.

"What would have awaited Ukraine (without the deal)? The answer is clear -- bankruptcy and social collapse," Azarov said as he opened a cabinet meeting.

Russia's President Vladimir Putin (left) shakes hands with his Ukrainian counterpart Viktor Yanukovych during their meeting at the Kremlin in Moscow, on December 17, 2013
Russia's President Vladimir Putin (left) shakes hands with his Ukrainian counterpart Viktor Yanukovych during their meeting at the Kremlin in Moscow, on December 17, 2013

"This would have been the New Year's present for the people of Ukraine," he added with characteristic irony, describing the Moscow accord as a "historic event".

Putin on Tuesday agreed to buy $15 billion (11 billion euros) of Ukraine's debt in eurobonds and slash its gas bill by a third, a move economists said would stave off the risk of a Ukrainian default for now.

The opposition to Yanukovych fears there must be hidden strings attached to the package, and vowed to keep pushing for early elections and the shelved deal with the European Union.

But Azarov said Ukraine could not possibly have signed the Association Agreement with the European Union as Kiev would have had to have accepted unfeasibly stringent IMF conditions for economic reform.

"The agreements that were signed offer good perspectives for the Ukrainian economy," Azarov said of the Moscow talks.

'Yanukovych sold our country'

Ukrainian opposition deputies block the platform during a parliamentary session in Kiev, on December 18, 2013
Ukrainian opposition deputies block the platform during a parliamentary session in Kiev, on December 18, 2013

In a show of confidence, he warned the thousands still occupying Kiev's Independence Square by saying the government "will not allow anyone to destabilise" the country further.

The deal left the opposition fuming and European diplomats complaining it was nothing more than a temporary stop-gap to plug a hole in the Ukrainian economy.

"Yanukovych used Ukraine as a pawn," opposition leader and world boxing champion Vitali Klitschko told the crowd of about 50,000 on Independence Square late Tuesday, accusing the president of handing Ukraine's industries to Russia as collateral in order to get the funding.

"The big question is, what did Yanukovych sign?" Klitschko said.

An activist stands atop a barricade flanked by the European Union and Ukrainian flags during an opposition rally on Independence Square in central Kiev on December 17, 2013
An activist stands atop a barricade flanked by the European Union and Ukrainian flags during an opposition rally on Independence Square in central Kiev on December 17, 2013

It remained unclear what Russia is getting in return for the $15 billion bond-buying scheme as well as cutting the price of natural gas exports to Ukraine to $268.5 per 1,000 cubic metres from about $400.

Ukrainian Energy Minister Eduard Stavytsky said the gas price discount would be worth $7 billion to the Ukrainian government, making the total package worth some $22 billion.

European Union chair Lithuania warned that Ukraine had only delayed a looming crisis. "If money is given to plug a hole, it only postpones the crisis," Foreign Minister Linas Linkevicius told AFP.

Swedish Foreign Minister Carl Bildt echoed his comments.

Russia's Gazprom has agreed to sell gas to Ukraine at a price of $268.50 for 1,000 cubic metres, a huge discount from the current level of around $400
Russia's Gazprom has agreed to sell gas to Ukraine at a price of $268.50 for 1,000 cubic metres, a huge discount from the current level of around $400

"Russian emergency loans to Ukraine risks further delaying urgent economic reforms and necessary EU modernisation," he tweeted. "Decline might continue."

White House spokesman Jay Carney indicated that Washington was unimpressed by the deal, saying it would "not address the concerns" of the thousands of protesters camped out day and night on Independence Square over the last weeks.

German Chancellor Angela Merkel said she "regretted" Yanukovych's snub of the Association Agreement but said that the offer "remains on the table".

'A victory for Putin'

Putin, in a clear message to the protesters in Kiev, said Russia did not discuss Ukraine's membership in the Moscow-led Customs Union in exchange for the announced benefits -- something the opposition widely expected.

"For the moment, Putin has scored a victory in the competition between Russia and Europe for Ukraine," said analyst Maria Lipman of the Carnegie Centre in Moscow.

The ex-Soviet nation of 46 million has been at the heart of a furious diplomatic struggle since Yanukovych's shock decision last month to ditch the landmark EU partnership accord and seek closer ties with its former master Russia.

Analysts said the deals announced by Putin should reduce Ukraine's current account deficit by around $4.5 billion a year but does not take the urgency out of overdue economic reforms.

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