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Ukraine stood to gain 19 billion euros from EU pact

Adrian Croft
Wednesday, 18 Dec 2013 | 3:38 PM ET

* Ukraine turned back on EU pact in favour of Russia

* Russia agreed $15 bln bailout, gas price cuts

BRUSSELS, Dec 18 (Reuters) - Ukraine could have been in line to receive at least 19 billion euros ($26 billion) in European Union loans and grants over the next seven years if it had signed a trade and cooperation agreement with the bloc, according to internal EU estimates.

Ukraine last month abandoned plans to sign the trade agreement with Brussels at the last moment in favour of closer ties with former Soviet overlord Russia, sparking huge demonstrations in protest.

Desperate for cash to cover a big external funding gap, Ukraine turned to Russia, which on Tuesday agreed a $15 billion bailout for Ukraine and slashed the price of gas exports.

The EU has steered clear of getting into a bidding war with Russia for Ukraine, and the only specific amount it has talked about publicly has been a 610 million euro loan it was prepared to offer Ukraine if it met conditions for receiving help from the International Monetary Fund (IMF).

But internal EU estimates shown to Reuters showed the total EU loans and grants to Ukraine between 2014 and 2020 would be at least 19 billion euros, provided Kiev signed the trade deal with the EU and reached an agreement with the IMF.

An EU source said this was a conservative figure and it had never been mentioned to Ukraine officials during negotiations on the trade pact.

"We will never be in the business of window-dressing or competition to propose more money because our offer is not about money," the source said.

The figure is not far short of the 20 billion euros in aid that Ukraine's Prime Minister Mykola Azarov said last week he was seeking from the EU to offset the cost of signing the EU deal. The EU disputes Ukraine's estimate of how much it will cost to adapt its economy for the trade accord.

The EU had been prepared to advise Ukraine on reaching an agreement with the IMF if it had signed the deal.

If Ukraine had reached an agreement with the IMF and met its conditions, the EU would have agreed to a "fast-track disbursement" of a first package of financial aid for Ukraine and would have been ready to begin work on a second package of financial aid, the source said.

Once Ukraine had signed the trade agreement, the EU had been ready to organise an investment conference bringing together donors and the private sector to invest in the country.

While the EU has stressed that the proposed trade agreement with Ukraine remains on the table, and Ukraine's first deputy prime minister Serhiy Arbuzov said last week Kiev was ready to sign it, EU officials see little hope of any movement soon.

EU enlargement chief Stefan Fuele told Arbuzov last week that, if Ukraine gave a clear commitment to signing the EU deal, the EU would work with Kiev to prepare a roadmap for implementing the agreement.

But Fuele said on Twitter on Sunday that he was putting that work on hold because Ukraine had failed to provide the commitment.