The Russian government has decided to place in Ukrainian bonds part of the reserves of the Russian National Wealth Fund (NWF) worth USD 15bn , Russian President Vladimir Putin has announced. According to Russian FinMin, Anton Siluanov, the first tranche of Eurobonds will be bought already this year. Also, Ukraine's Naftogaz and Russia's Gazprom have agreed on the price of natural gas at USD 268.5 per 1,000 cubic meters compared to USD 400 per 1,000 cubic meters Ukraine currently pays. The new price will take effect at the start of next month, Ukraine's energy minister said. Russia also agreed to remove trade barriers, it put up at the start of the year, when it feared that Ukraine is eager to sign FTA agreement with the EU. Moreover, Ukraine and Russia have signed an intergovernmental agreement on joint construction of a bridge across the Kerch Strait . Ukraine and Russia also have signed the agreement on the government support for resuming mass production of AN-124 aircraft with D-18T engine and their modifications. The demonstrators in Ukraine were worried that Yanukovych would cut a secret deal to join a Customs Union that Russia has established with Belarus and Kazakhstan . However, Russian president stressed that the decision to provide financial aid and reduce gas price was not linked to any conditions, particularly accession of Ukraine to the Customs Union of the Common Economic Area ( Russia , Belarus , and Kazakhstan ). We deem the news to be positive for Ukraine at least in the short/medium term. The financial support will help revive foreign reserves and lower gas price will help to improve balance of payments. What remains in question, is on which terms and conditions, Yanukovych has signed the deal. In the meantime, the deal signed, boosted the price of Ukraine's dollar debt, a sign of investors' confidence. According to Bloomberg , the yield on Ukrainian dollar bonds due 2023 plunged more than 1pps to 8.89% as of 5:42 p.m. in Kyiv , the lowest since June 17 . Even though the consequences for the anti-government rallies are not immediately clear, the announcement of lower gas price and financial aid to be provided, might change the political situation in the country. In the near term, it will spare the government from negotiations with the IMF, the EU or the United States . The Fitch Ratings wrote on Dec 16 that the longer the protests continue, the higher the risk that political uncertainty will raise demand for foreign currency, cause inward investment to dry up, or trigger capital outflow. The Party of Regions governing lawmaker, Mykhailo Chechetov, said that the governemnt changes will be made by year-end. Hanna Herman , another ruling-party lawmaker, said the party asked Azarov to change 90% of his ministers. It is possible that the President will dismiss EconMin Ihor Prasolov, Foreign Minister Leonid Kozhara and Industrial Policy Minister Mykhailo Korolenko for failing to inform the government in time about risks linked to signing an EU trade deal, Kommersant newspaper has announced, without quoting the source.
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