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Moscow's $15 billion financial aid to Ukraine should benefit the Russian economy and risks for both countries would have been greater if Kiev had received no help, Russian Finance Minister Anton Siluanov told Reuters on Wednesday.
Ukraine's President Viktor Yanukovich and Russia's Vladimir Putin announced the bailout package for Kiev after talks on Tuesday. The deal also includes lowering the price Ukraine pays for Russian gas deliveries by about one-third.
Siluanov said the aid would enable Ukraine to rebuild its finances and should strengthen ties between the neighbors.
"Ukraine's assets certainly do not have such high ratings as other papers in which we now invest our reserves," Siluanov said in an interview.
"However, we understand the need to support our neighbor, as we have very tight trade and economic connections."
He said there would have been more "negative" impact on both economies if Russia had not taken the decision to help Kiev.
"I believe that Russia only won from it," Siluanov said.
Trade between Russia and Ukraine was worth $6.6 billion in 2012 compared with Russia's total trade turnover of $171 billion. Kiev remains a strategic partner for Moscow, however, and Russia transports a big chunk of its gas exports to Europe through the country.
Although the $15 billion that will be spent in part on buying Ukraine's debt makes up 19 percent of a Russian oil fund, Siluanov said the rescue deal should not decrease Moscow's credibility among investors.
"There is no basis for that," Siluanov said. "We will be looking for other sources and ways to lower the amount used from the National Welfare Fund."
Ukraine is not on the list of countries in which the Fund one of Russia's two rainy day funds can invest, and its debt is rated below the level allowed by the Fund's rules.
Following the aid deal's announcement, the Finance Ministry said it had drafted a resolution that would allow the government to get around this.
Moody's rates Ukraine's sovereign debt Caa1, while Standard and Poor's and Fitch rate it a notch higher at B minus. All the ratings are in the 'junk' category.
Siluanov said the money given to Ukraine might be a step towards diversifying the Fund's investments to include the debt of emerging market countries:
"We had agreed before that we would seek to diversify our portfolio into equally reliable assets, but with greater profitability."
The finance minister added that the proportion of the Fund's investments allocated to long-term assets will not exceed the 40 percent threshold previously set.
"We do not see any critical situation here," Siluanov said.(S-W)(Reuters)(GNN)
(Additional reporting by Maya Nikolaeva and Daria Korsunskaya; Editing by Catherine Evans)
Ukraine's President Viktor Yanukovich and Russia's Vladimir Putin announced the bailout package for Kiev after talks on Tuesday. The deal also includes lowering the price Ukraine pays for Russian gas deliveries by about one-third.
Siluanov said the aid would enable Ukraine to rebuild its finances and should strengthen ties between the neighbors.
"Ukraine's assets certainly do not have such high ratings as other papers in which we now invest our reserves," Siluanov said in an interview.
"However, we understand the need to support our neighbor, as we have very tight trade and economic connections."
He said there would have been more "negative" impact on both economies if Russia had not taken the decision to help Kiev.
"I believe that Russia only won from it," Siluanov said.
Trade between Russia and Ukraine was worth $6.6 billion in 2012 compared with Russia's total trade turnover of $171 billion. Kiev remains a strategic partner for Moscow, however, and Russia transports a big chunk of its gas exports to Europe through the country.
Although the $15 billion that will be spent in part on buying Ukraine's debt makes up 19 percent of a Russian oil fund, Siluanov said the rescue deal should not decrease Moscow's credibility among investors.
"There is no basis for that," Siluanov said. "We will be looking for other sources and ways to lower the amount used from the National Welfare Fund."
Ukraine is not on the list of countries in which the Fund one of Russia's two rainy day funds can invest, and its debt is rated below the level allowed by the Fund's rules.
Following the aid deal's announcement, the Finance Ministry said it had drafted a resolution that would allow the government to get around this.
Moody's rates Ukraine's sovereign debt Caa1, while Standard and Poor's and Fitch rate it a notch higher at B minus. All the ratings are in the 'junk' category.
Siluanov said the money given to Ukraine might be a step towards diversifying the Fund's investments to include the debt of emerging market countries:
"We had agreed before that we would seek to diversify our portfolio into equally reliable assets, but with greater profitability."
The finance minister added that the proportion of the Fund's investments allocated to long-term assets will not exceed the 40 percent threshold previously set.
"We do not see any critical situation here," Siluanov said.(S-W)(Reuters)(GNN)
(Additional reporting by Maya Nikolaeva and Daria Korsunskaya; Editing by Catherine Evans)
