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Ukraine expects remaining $12 billion of Russian bailout in early 2014

KIEV (Reuters) - Ukraine expects a $15 billion bailout package from Russia to be fully disbursed in early 2014, Ukrainian Prime Minister Mykola Azarov said on Wednesday after Kiev received the first $3 billion tranche.

Russia agreed to bail out Ukraine by purchasing its sovereign bonds after Kiev performed a sharp foreign policy U-turn and refused to sign deals on political association and free trade with the European Union in late November.

Russia told Ukraine on Tuesday it had transferred the first $3 billion tranche of the bailout, part of plans to keep Kiev firmly within Moscow's orbit.

"We expect the remaining $12 billion in the beginning of next year," Azarov told a government meeting on Wednesday.

The deal with Russia sparked large-scale protests in Ukraine. Hundreds of thousands of people have gathered every weekend on Kiev's main square to demand the government's resignation.

President Viktor Yanukovich, however, has largely ignored their demands and pressed ahead with the Russian rapprochement, securing, in addition to the bailout money, a sizeable discount on the price of natural gas imported from Russia.

"The Russian loan is a critical factor in stabilizing our state finances and economy," Azarov said on Wednesday.

Ukraine's current account and budget deficits have been growing for the last few years as the government stuck to a pegged hryvnia exchange rate and continued to subsidize gas and heating prices for households.

Azarov told the government meeting that Ukraine's economy, which grew 0.2 percent in 2012, would remain flat this year.

(Reporting by Olzhas Auyezov; Editing by Pravin Char)

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