KIEV, Ukraine - Hidden behind the tug of war over whether Ukraine will cast its lot with Europe or Russia is the prospect of bankruptcy. Someone will need to chip in at least $10 billion in the coming months if Ukraine wants to keep its economy afloat.
With talks on resuming credit from the International Monetary Fund stalled, President Viktor Yanukovych heads to Moscow on Tuesday to see what Russia might offer in exchange for freezing a strategic trade deal with the European Union.
Analysts say that if President Vladimir V. Putin offers anything to Ukraine, one of Europe's poorest countries, it could be a mix of credit, investment pledges, and a discount on energy prices, particularly natural gas. But the Russian leader may not be generous, given the crisis being endured by Yanukovych and his ruling party and the flip-flopping by Ukraine's leadership about whether its allegiance lies with Moscow or Brussels.
Putin's aim "will be to keep Ukraine on the edge and dependent on Russian credits, to continue to pressurize Ukraine to eventually sign" the Moscow-led Customs Union, an organization that now includes Belarus and Kazakhstan, said Timothy Ash, an emerging-markets analyst with Standard Bank in London.
But a large part of Ukraine's 46 million population opposes this.
Massive crowds have protested in the center of Kiev for weeks against Yanukovych's decision last month to shun closer ties with the EU and to push his country toward Moscow. The demonstrations were galvanized after dozens of activists were injured when riot police violently broke up a small rally on Nov. 30.
Yanukovych is hoping he will find some sort of redemption when he meets his potential savior, Putin.
Without cash and cheaper natural gas, Ukraine's public finances will be increasingly untenable and could lead the country toward a default next year.
First Deputy Prime Minister Serhiy Arbuzov said this month that Ukraine needs a loan of about $10 billion to meet its payment obligations. However, the central bank has been burning through its reserves and only had $18.8 billion as of Dec. 1, down a quarter from the same period last year.
The political crisis is causing a downward spiral as investment freezes up, capital flight increases, and tax collection becomes increasingly difficult.
"The longer the standoff goes on, the greater the risk that political uncertainty will raise demand for foreign currency, cause inward investment to dry up, or trigger capital flight, causing additional reserve losses and increasing the risk of disorderly currency moves," Fitch Ratings wrote Monday.