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European Union foreign policy chief Catherine Ashton, middle, visits a memorial for victims of last week's clashes in Kiev February 24, 2014. Ashton arrived in Kiev to discuss measures to shore up the ailing economy, which the finance ministry said needs urgent financial assistance to avoid default. (Viktor Gurniak/REUTERS)
European Union foreign policy chief Catherine Ashton, middle, visits a memorial for victims of last week's clashes in Kiev February 24, 2014. Ashton arrived in Kiev to discuss measures to shore up the ailing economy, which the finance ministry said needs urgent financial assistance to avoid default. (Viktor Gurniak/REUTERS)

Cash-strapped Ukraine awaits bailout Add to ...

Desperate for cash and fearing Moscow will cut off billions in vital aid, Ukraine’s new interim government appealed Monday for a massive infusion as major powers jockeyed to shape the political outcome of the strategically located but bitterly divided nation.

Ukraine is “heading into the abyss,” warned acting president Oleksander Turchinov while Moscow furiously denounced the interim government and accused Western powers of meddling to oust the pro-Russian former president Viktor Yanukovych.

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No massive bailout package – like the $35-billion (U.S.) Mr. Turchinov said is needed over the next two years – will be quickly available, but the European Union and others were scrambling to find short-term, bilateral loans to cover Kiev’s immediate needs and avoid a default that could plunge Ukraine into another crisis.

Russia had promised $15-billion to help bail out Ukraine when its government was still firmly in Moscow’s orbit. But President Vladimir Putin’s government expressed nothing but disdain for the struggling new government that ousted Russian ally Mr. Yanukovych, who fled Kiev for the Russian stronghold of Crimea, an autonomous republic within Ukraine that is home to Russia’s Black Sea Fleet.

“If you consider Kalashnikov-toting people in black masks roaming Kiev to be a government, then it will be hard for us to work with that government,” said Russian Prime Minister Dmitry Medvedev, adding that the turmoil in Ukraine poses “a real threat to our interests and to the lives of our citizens.”

The top deputy of Ukraine’s deposed president went further, warning in an interview Monday with The Globe and Mail that civil war looms if the acting government in Kiev tries to exert its authority over Russian-speaking regions in the east and south of the country.

“This is a very dangerous moment,” said Oleg Tsarev, who led the parliamentary faction of Mr. Yanukovych’s Party of Regions before he and many of the party’s deputies abandoned the capital this past week as the pro-Western protesters took over government institutions.

Speaking by cellphone from his home city of Dnepropetrovsk, in the centre-east of the country, Mr. Tsarev warned that the situation would devolve rapidly if the pro-European Union protesters tried to expand their control – particularly if they try to push into the Crimea.

“The worst-case scenario would be if the self-defence forces try and go to Crimea,” he said, referring to the anti-Yanukovych fighters that battled riot police in Kiev, using crude weapons. “Then a war will start. And Russia cannot do nothing.”

He said the separation of Ukraine into two or more parts was now increasingly possible, and alleged that the protests that brought down Mr. Yanukovych were organized and funded by Western governments. “The ambassadors of the European Union and the U.S. have ... pushed out an elected government and brought in an illegal government.”

Former regime insiders have accused Mr. Tsarev of being among the hawks who advised Mr. Yanukovych to crack down earlier and harder on the pro-EU protesters who have occupied the centre of Kiev since November.

In its own stark message to Moscow, the Obama administration warned it would be a “grave mistake” if Russia intervened in Ukraine. Despite deep fissures inside the country, it is “not in the interest of Ukraine or of Russia, or Europe, or the United States,” to see Ukraine split, said President Barack Obama’s national security adviser Susan Rice.

The International Monetary Fund, the United States and the EU signalled a willingness to help cash-strapped Ukraine, but whether a bailout could occur before elections now scheduled for May remains unclear. A senior State Department official, speaking on condition of anonymity Tuesday, said it was crucial that any funding go through the IMF, which has the experience to help countries implement difficult economic reforms.

Once a major agricultural producer to other states within the former Soviet Union, Ukraine’s economy faltered with the global recession. Markets for its key exports of metal and engineering products shrank, leaving its economy smaller than it was in 1992, a year after independence. The IMF and EU institutions over the past few years have approved billions of loans, but say Ukraine, which owes nearly $13-billion in debt payments this year, failed to make needed structural reforms.

Short-term bilateral loans might bridge the gap. EU leaders are considering calling an international donors conference, and have contacted a range of countries in attempt to garner and co-ordinate aid. Among them are Canada, Japan, China and Turkey, a senior European Commission official told Reuters.

The Canadian government, however, provided no details. “Canada will continue to work with our allies and like-minded countries to build a co-ordinated path forward,” said Adam Hodge, a spokesman for Foreign Minister John Baird.

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