EU Document: Ukraine Could Have Received Large Aid Package Had It Agreed to Deals

By Laurence Norman

Loans, Grants Upward of €19 Billion Would Have Been Available Had Kiev Signed On to EU, IMF Pacts


Kiev could have gained upward of 19 billion euros in loans and grants over the next seven years it had agreed to EU, IMF deals, an EU document showed.


Ukraine could have received upward of 19 billion euros in loans and grants from the European Union over the next seven years if it had agreed to an EU deal and an International Monetary Fund loan package, according to a draft EU document seen by The Wall Street Journal.


The package, which would have included some €1.5 billion in grants, was described by a senior EU official as a preliminary internal estimate of what Kiev could have gained if it had deepened political and trade ties with the bloc. However, the official said the estimate was designed to be a “conservative” one and that actual transfers could have been higher.


Russian President Vladimir Putin unveiled Tuesday an agreement to provide Ukraine $15 billion in loans and cut the price of critical natural-gas supplies by one-third, a move that came after President Viktor Yanukovych last month put on hold a long negotiated EU agreement.


Tuesday’s deal was immediately denounced by the Ukrainian opposition and protesters camped in Kiev’s central square who have demonstrated against Mr. Yanukovych since he put the EU deal on hold.


One of Mr. Yanukovych’s principal complaints was that the EU wasn’t offering enough financial assistance to help Ukraine prepare for the economic reforms it would need to carry out as part of the EU deal. He also wanted compensation to help counter Russian economic pressure on the Ukrainian economy. EU officials say Kiev was requesting tens of billions of euros.


With Moscow pressing Mr. Yanukovych to walk away from the EU deal and deepen economic ties with Russia, Ukraine’s government had also bristled at the economic conditions tied to an IMF deal, in particular the multilateral lender’s insistence that the government raise domestic gas prices.


In recent days, there has been growing criticism of the Ukrainian government in Brussels. EU foreign-policy chief Catherine Ashton has slammed the excessive use of force Kiev has used against protesters.


EU enlargement chief Stefan Füle last week accused Kiev of spreading “grossly exaggerated speculations” about the costs attached to signing the EU deal. Brussels says the deal will bring immediate trade and assistance benefits and will, over time, help the country’s economy become internationally competitive.


On Sunday, Mr. Füle said he was suspending discussions with Ukraine on implementing the deal because the government still refused to give a clear pledge it would soon sign the pact.


Mr. Füle had already said the EU would significantly step up its assistance to Ukraine if it signed the pact that currently amounts to several hundred million euros a year. The bloc also has EUR610 million in “macro-financial” assistance ready for when Ukraine signs an IMF deal.


In a meeting last Thursday, Mr. Füle discussed with Ukrainian Deputy Prime Minister Serhiy Arbuzov some of the steps the EU could take if Ukraine committed seriously to the EU deal.


According to a second EU document, that included helping facilitate the IMF deal, the “fast-track” disbursement of the €610 million aid once an IMF agreement was signed and the preparation of a second significant financial assistance package.


However, with the EU insisting it wouldn’t enter an auction with Russia to buy Ukraine’s partnership, Mr. Arbuzov was told there would be no specific commitments until Kiev pledged to signing the EU deal, the senior EU official said. As a result the €19 billion figure was never shared with Kiev.


Despite Tuesday’s deal with Russia, European officials have said the door remains open for Kiev to sign the EU pact.


There is, however, growing resignation that the chances of a deal before Ukraine’s 2015 presidential elections have slimmed significantly. On Monday, U.K. Foreign Secretary William Hague said the prospects of Kiev signing “have gone back a long way.”


The senior EU official said Wednesday: “I don’t see us moving closer to the signing of the association accord.”