Ukraine’s government has insisted its decision to suspend negotiations on the country’s Association Agreement with the European Union was a purely economic one.
Prime Minister Mykola Azarov said the u-turn over the EU deal, which has enraged opposition politicians, was partially prompted by the harsh terms demanded by the International Monetary Fund (IMF) in a debt refinancing plan.
Moody’s rating agency has classified Ukraine as a “very high default risk”. Analysts believe that Ukraine is set to run out of cash within months if it does not secure funding.
Issuing government bonds could help raise some cash but Ukraine’s economic outlook would need to improve in order for that strategy to have any effect, according to Francois Girod at Ukrissibbank-BNP Paribas in Kyiv.
“They can issue bonds, if there’s some good news on the financial front. For example, if the IMF reaches some kind of agreement on refinancing; or if the Association Agreement with Europe had been signed; or if Russia comes to help and states publicly that they can provide some kind of financing,” Girod told euronews.
Political scientist Mykhaylo Pogrebinsky is one of several experts who believe Russian President Vladimir Putin may have made Ukraine’s President Victor Yanukovich an offer he could not refuse during talks that took place ahead of the suspension of the EU deal.
“I’m almost sure that negotiations between Putin and Yanukovich covered the issue of loan on preferential terms from Russia. I think the amount in question is around 15 billion dollars (11 billion euros). It would include a lower price for gas, and a renewal of orders to Ukrainian enterprises from Russian companies,” Pogrebinsky told euronews.