Russia to save Ukraine fram default, but it could deprive it of financial independence, says expert

The agreements reached between Ukraine and Russia on Tuesday will save Ukraine from default, strengthen the national currency and improve situation in several fields of industry, but the country could fall into financial dependence on Russia, said Ukrainian economic expert, ex-Minister of Economy, Director of the Market Reforms Centre Vladimir Lanovoy.

On Tuesday the Russian-Ukrainian inter-state commission under chairmanship of Russian and Ukrainian Presidents Vladimir Putin and Viktor Yanukovich reached several agreements, including the one on reduction of Russia gas price for Ukraine by one third to $268.50 per 1000 cub.m. and on purchase of Ukraine’s Euro bonds worth $15 billion by Russia.

“The lower gas price will protect the Ukrainian currency from devaluation and the country from default. Ukraine could have securities default at the western markets at the end of this year or early next year,” Lanovoy told RIA Novosti.

He said reduction of gas price will also allow improving work and raising profitability of enterprises of the petrochemical industry and the plants manufacturing mineral fertilizers. “Cost product of metal production could go down a little bit,” expert added.

   The expert, however, believes that purchase of Ukraine’s Euro bonds worth $15 billion by Russia will mean loss of financial independence. “We will fall into a financial dependence. One cannot borrow so much from one creditor. If the country wants to preserve its independence and sovereignty, it needs to borrow money from several creditors,” Lanovoy added.

“During three years the country will not overcome the crisis. GDP will continue declining, profitability of enterprises will go down and the budget deficit will grow and after three years Ukraine will be at Russia’s feet. We will have to make another concessions, because of such a huge financial debt,” he added.—0—