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Friday, March 20, 2009

Ukraine PM seeking $5 billion loan from Russia

The Associated Press
Published: March 19, 2009

Ukraine PM seeking $5 billion loan from Russia
The Associated Press
Published: March 19, 2009

KIEV, Ukraine: Prime Minister Yulia Tymoshenko will travel to Russia early next month to seek a $5 billion (€3.66 billion) loan for Ukraine's collapsing economy, her office said Thursday, defying the pro-Western president who is her bitter political rival.

President Viktor Yushchenko has assailed Tymoshenko over her efforts to secure a loan from Russia, saying it would make Ukraine overly reliant on a huge neighbor determined to bolster its influence over the country and keep it out of NATO.

Tymoshenko and Russian Prime Minister Vladimir Putin are also expected to discuss adjustments to a long-term gas agreement they brokered in January, ending a price dispute that prompted a two-week cutoff of Russian natural gas supplies to Europe via Ukraine.

The agreement, which stipulates how much gas is purchased and delivered to European consumers through pipelines crossing Ukraine, must be changed because Ukraine and European countries have slashed consumption due to the global financial crisis, Tymoshenko's top aide Oleksandr Hudyma said.

Tymoshenko is due in Moscow on April 7-8, Hudyma said. She will seek the loan in order to help cover a huge budget deficit and pay off the debts of the embattled energy giant Naftogaz, he said.

In Moscow, Russian Foreign Ministry spokesman Andrei Nesterenko said Russia had received a request for a $5 billion loan to Ukraine and was considering it.

Tymoshenko's planned trip is likely to deepen her long-standing political confrontaiion with Yushchenko, a former ally she has vowed to succeed in a presidential election expected late this year. The two teamed up against a Russian-backed presidential candidate in the 2004 Orange Revolution protests that ushered Yushchenko to power, and both favor closer integration with the U.S. and Europe.

But Tymoshenko has proved more willing to negotiate with Russia, and held lengthy talks with Putin in Moscow in January to come up with the deal that ended the embarrassing European gas supply cutoff.

Hudyma insisted that loan she is seeking, with payment over five to 10 years at an annual interest rate of 10-12 percent, will have no political conditions or implications attached.

Ukraine is reeling from the global financial meltdown, which has depressed demand for the steel and chemicals that are crucial sources of its export income. Industrial output fell by nearly one-third in February, year-on-year, the national currency has shed nearly half its value against the U.S. dollar since September and the economy is expected to shrink by 6 percent this year.

Ukraine is struggling to stay afloat without the crucial second installment of a$16.4 billion (€12 billion) emergency loan from the International Monetary Fund. The IMF withheld the payment last month because of the Tymoshenko's reluctance to trim government spending, and it has yet to come through despite signs of progress toward reviving the deal.

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