Ukraine targets $13.5 billon aid in 2014
Moody’s cuts rating to Caa3; Kyiv eyes arbitration if Russia doesn’t cut gas price.
Ukraine said it stands to receive $13.5 billion of international funds this year as the European Union threatened Russia with more sanctions.
Moody’s Investors Service, citing the political crisis afflicting Ukraine, cut the country’s credit rating on Friday. Moody’s lowered the rating one level to Caa3, two steps above default, with a negative outlook. The financing for Ukraine will come from the International Monetary Fund, which is due to sign off on an aid package this month, as well as the World Bank and the European Bank for Reconstruction and Development, Prime Minister Arseny Yatsenyuk said on Friday.
“It’s difficult to persuade foreign investors that everything’s OK in your country when thousands of Russian troops and hundreds of tanks are on Ukraine’s borders,” Yatsenyuk told business leaders gathered in the capital, Kyiv. After only a “token” withdrawal of Russian forces from Ukraine’s eastern frontier, new penalties “have to be ready,” UK Foreign Secretary William Hague said in Athens.
Ukraine is battling to rescue its cash-strapped economy while still under military threat from Russia. It sealed a preliminary bailout agreement with the Washington-based IMF last month, envisaging as much as $18 billion in loans over two years.
The rescue would unlock additional international financing, bringing the total package to $27 billion. The World Bank was holding talks last night with Ukraine’s government over the first tranche of a $1 billion loan, the Unian news service reported.
Meanwhile, Ukraine warned on Saturday it would take Russia to arbitration court if natural gas talks with Moscow failed to roll back price hikes that Kyiv called an act of economic aggression.
“Our Russian neighbours have carried out yet another form of aggression against Ukraine — aggression through its gas supplies. This price is the highest on European territory and it is not an economic but a political price,” said the Prime Minister Arseny Yatseniuk.
Ukraine is still in talks with Russia to cut the gas price, which Moscow raised to $485 per 1,000 cubic metres from a previously discounted price of $268.50, making it now by far the highest price paid in Europe for Russian gas.
The Russian gas export monopoly Gazprom says that on average it charges its European customers between $370 and $380 per 1,000 cubic metres. It said Ukraine owes more than $2.2 billion for gas and must take steps immediately to repay its debt while adding more fuel to storage to ensure uninterrupted transit to Europe.
Ukraine imports more than half its gas needs from Russia.
“If we don’t come to an agreement (with Russia) then there is a procedure laid out in our contract, going to the arbitration court in Stockholm,” Ukrainian Energy Minister Yuri Prodan told journalists before a cabinet meeting.