Ukraine President Criticizes PM Over Russian Loan

KIEV, Ukraine -- Ukraine's president criticized his rival, Prime Minister Yulia Tymoshenko, for seeking a $5 billion rescue loan from Russia, saying Tuesday that deal would make the country overly dependent on its giant neighbor.

Prime Minister Yulia Tymoshenko.

President Viktor Yushchenko said at a security council meeting that Ukraine may be unable to pay back the loan Tymoshenko is seeking and have to cede control of its strategic gas transit system to Russia in lieu.

Tymoshenko requested financial aid from Russia and a number of other countries after talks on getting a second tranche of a key $16.4 billion emergency loan from the International Monetary Fund stalled last week.

The Washington-based IMF said Ukraine must make more efforts to strengthen the shaken banking system, stabilize the fallen national currency and maintain fiscal discipline.

The gas pipelines, meanwhile, were at the center of a bitter New Year's feud between Russia and Ukraine. Ukraine's status as a transit country for Europe-bound Russian gas irks Moscow because it gives Kiev control over the gas with which Russia is contracted to supply EU countries.

Passing the transit system to Russian hands would deprive Kiev of leverage in such issues as transit prices and prices for its own gas from Russia.

For her part, Tymoshenko said she would not let that happen.

In a sign of the fragility of the relationship between the two former Soviet republics, a dispute over those issues led Russia to cut off natural gas supplies to Europe via Ukraine in January, leaving more than a dozen European countries freezing in winter temperatures.

Yushchenko's comments also highlighted the alarming state of the Ukrainian economy, which is struggling to avoid an all-out collapse in the face of the global economic crisis. The state budget is crippled by higher gas bills from Russia and multibillion dollar debts accumulated by state gas company Naftogaz.

Source: International Herald Tribune