(MENAFN- AFP) President Vladimir Putin on Tuesday announced a plan to buy $15 billion of Ukrainian bonds and slash Kiev's bill for Russian gas imports, in a boost for embattled President Viktor Yanukovych as he faces monster protests over a rejected EU pact.
Russia also agreed to remove trade barriers it put up at the start of the year when it seemed that Kiev was on the verge of signing a historic trade and political association agreement with Brussels that would have pulled it out of Moscow's orbit for the first time.
The help from Russia may allow Kiev to stave off the threat of an imminent balance of payments crisis and possible default amid a recession that has seen the economy shrink since the first half of last year.
"The Russian government made a decision to invest part of the National Welfare fund to the amount of $15 billion in Ukrainian government securities," Putin told reporters after holding about three hours of Kremlin talks with Yanukovych.
Russia's Finance Minister Anton Siluanov said Moscow would invest the $15 billion into Ukrainian eurobonds that Kiev intends to issue at a later date.
Putin also said Russian gas giant Gazprom would now sell gas to Ukraine at a price of $268.50 for 1,000 cubic metres, a huge discount from the current level of around $400.
But the Russian leader crucially stressed that the two sides did not discuss Ukraine's membership in a Russian-led Customs Union that Putin hopes to build into a rival to the 28-nation bloc but which the opposition in Kiev fears could ruin their EU integration dreams.
"I would like to calm everyone down, today we have not discussed the issue of Ukraine joining the Customs Union at all," Putin said.
'Deepen strategic cooperation'
The ex-Soviet nation of 46 million has been at the heart of a furious diplomatic tug of war since Yanukovych's shock decision last month to ditch a landmark EU partnership agreement and seek closer ties with its traditional master Russia.
Tuesday's talks came two days after frustrated EU officials suspended months of partnership negotiations with Ukraine.
The Ukrainian leader stressed the importance of Kiev's ties to Moscow during a signing ceremony that saw him exchange smiles and private whispers with Putin.
Yanukovych said the agreement on the removal of trade restriction in particular represented "a road map that will help us substantially" boost trade.
"The implementation of this action plan will substantially deepen our strategic cooperation in many areas," the Ukrainian leader said.
Yanukovych's reversal on the EU pact sparked the largest anti-government rallies since the 2004 pro-democracy Orange Revolution that first nudged Ukraine on a westward path.
It has also exposed the deeply embedded cultural fault lines that run between the nationalist and Ukrainian-speaking west of the country and the more Russified east aligned with Moscow.
The Ukrainian government has organised counter-rallies by bussing thousands of people into Kiev from eastern regions where Yanukovych enjoys broader support.
Yet those demonstrations have been dwarfed by the pro-EU protest -- a permanent camp that features rock concerts and gathers hundreds of thousands on the same central square that was at the heart of the 2004 revolt.
The latest big rally drew nearly 300,000 people to central Kiev on Sunday and the opposition plans another huge rally on Tuesday evening aimed at putting still more pressure on Yanukovych.
Events in recent days suggest Yanukovych is scrambling for a way out of the deepest political crisis of his nearly four-year rule.
He held an inconclusive meeting with three top protest leaders on Friday and followed that up by sacking senior officials whom he held responsible for a violent crackdown on protesters at the end of last month.
But the Ukrainian leader has firmly rejected the opposition's main demand that Prime Minister Mykola Azarov resign immediately and fresh presidential and parliamentary polls be held.
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