(Reuters) - President Vladimir Putin raised the pressure on Ukraine on Wednesday, saying Russia would wait until it forms a new government before fully implementing a $15 billion bailout deal that Kiev urgently needs.
Putin repeated a promise to honour the lifeline agreement with Ukraine in full, but left open the timing of the next aid instalment as Kiev struggles to calm more than two months of turmoil since President Viktor Yanukovich walked away from a treaty with the European Union.
A day after Prime Minister Mykola Azarov resigned on Tuesday, hoping to appease the opposition and street protesters, Russia tightened border checks on imports from Ukraine in what looked like a reminder to Yanukovich not to install a government that tilts policy back towards the West.
Ukraine's new interim prime minister promised to try to limit the economic damage inflicted by the sometimes violent street protests, and said he expected Russia to disburse a further $2 billion aid instalment "very soon".
Putin had less of a sense of urgency. "I would ask the (Russian) government to fulfil all our financial agreements in full," he said, repeating a promise made on Tuesday after the government resigned in Kiev.
However, he signalled that the latest instalment was on hold in remarks he made during a meeting with senior government officials, extracts of which were broadcast later on Russian TV.
"Let's wait for the formation of a Ukrainian government," he said, before telling the meeting: "But I ask you, even in the current situation, not to lose contact with our (Ukrainian) colleagues," adding that discussions should continue before a new government is formed.
Alarm about Ukraine is growing in the West. German Chancellor Angela Merkel telephoned Putin and Yanukovich on Wednesday, urging a constructive dialogue between the government and opposition in Kiev. "The situation must not be allowed to spiral again into violence," a German government spokesman quoted her as saying.
NATO Secretary General Anders Fogh Rasmussen was more forthright, blaming Russia for Kiev's failure to sign the EU deals. "An association pact with Ukraine would have been a major boost to Euro-Atlantic security, I truly regret that it could not be done," he told the French newspaper le Figaro. "The reason is well-known: pressure that Russia exerts on Kiev.
Ukraine badly needs the Russian money. Figures compiled by UniCredit bank before the bailout put its gross external financing requirements at $3.8 billion in the first three months of this year alone, including $2.29 billion for gas which is covered by the deal with Moscow.
That rises to $5.5 billion in April-June, including repaying a $1 billion bond which matures then. Altogether the government would need $17.44 billion this year to pay its foreign bills, including for Russian gas.
The EU's foreign policy chief, Catherine Ashton, called for sincere discussion during Ukraine's crisis. "The dialogue which has happened from time to time needs to become a real dialogue. We hope to see real progress in these coming days. Time is really of the essence," she said after meeting Yanukovich.
The opposition also wants a return to the previous constitution which would represent another significant concession since it would reduce Yanukovich's powers.
Speculation that Russia might cut the financial lifeline it has offered prompted the Standard & Poors agency to cut Ukraine's credit rating to CCC+ on Tuesday.
Arbuzov said the central bank was ensuring stability on the financial markets and he made no mention of any changes to his predecessor's policy of keeping the hryvnia currency pegged close to the dollar and maintaining subsidies for domestic gas - both criticised by the International Monetary Fund.
Source: Reuters
