According to a report from the Wall Street Journal,"so now we know what Russian President Vladimir Putin is willing to pay to keep Ukraine a loyal subject: $15 billion in cash, $2 billion in annual discounts on Russian natural gas, and other goodies. Empire rebuilding isn't cheap".
That's the package Mr. Putin announced on Tuesday, standing next to Ukraine's beleaguered President Viktor Yanukovych at the Kremlin. The Ukrainian faces popular demands to move his country toward Europe and overhaul the country's politics, and the billions are intended to ease Kiev's financial crunch and defuse a four-week-old protest movement.
This carrot strategy is a change for Mr. Putin, who in the summer imposed trade sanctions on Ukraine to make Mr. Yanukovych resist signing an "association" accord with the European Union. He dropped the EU treaty, but Ukraine erupted. The Russian is now tapping one-sixth of a domestic "rainy day" fund to buy $15 billion in Ukrainian bonds, which technically breaks Russian law against investment in non-creditworthy debt. At the stroke of a pen, he also ordered state-run Gazprom to give Ukraine a one-third discount on natural gas purchases. It's good to be the king.
Mr. Yanukovych's risky bet is that with the Russian rescue he can ride out the political crisis until an election scheduled for 2015. It's risky for Mr. Putin too. Mr. Yanukovych has lost his legitimacy to rule, and a more enlightened leader would seek a deal with the opposition that leads to early elections.
The U.S., which has public influence in Ukraine, could respond by considering sanctions on the Yanukovych government and its allies if it tries to keep power through repression. This message could be as powerful as the Kremlin's checkbook.
