KIEV, Dec. 23 - Russia closed a deal on Friday to buy Ukraine's newly-issued $3 billion Eurobond, part of a $15 billion bailout of its smaller neighbor, Reuters reported citing Russian Finance Minister Anton Siluanov.

Russia offered a lifeline to Ukraine last week, helping revive the country's economy and keep it within Moscow's orbit.

Moscow is tapping its National Welfare Fund, a rainy day reserve, to buy $15 billion worth of Ukrainian Eurobonds. It is also offering Kiev relief on the price of gas exports.

"The deal was closed on Friday," Siluanov told journalists on Monday, referring to the $3 billion bond. He added that another tranche of help will be set next year.
The non-tradable Eurobond matures in two years and has a coupon of 5 percent.

Kiev needs cash to cover its external funding gap, while the central bank's currency reserves are depleted by efforts to support the hryvnia and repay foreign debt.

The government owes around $8 billion in foreign debt payments next year. The amount due for gas imports, another part of its external obligations, is now unclear.

Ukraine paid out $1 billion per month in 2013 for gas imports, although the sum may change next year depending on the volume required. Russia slashed the price Ukraine pays for gas deliveries by about one-third.

The National Welfare Fund is intended to cover pension fund imbalances, which amounts to 4.2 percent of gross domestic product.

Alexei Kudrin, a former Russian finance minister respected for his fiscal policies, on Monday backed the Kremlin’s decision to provide the loan to Ukraine.

"In general, I support measures to support Ukraine, despite the fact that they are somewhat more expensive for Russia than they could have been. We are partially covering this shortcoming of the Ukrainian government and the consequences of this political crisis," Kudrin told reporters.

His only hope is that the money is not wasted by the Ukrainian authorities.

"It turns out that we are not even setting any conditions. We need to have an idea of what resources this money will be repaid with. If it is spent on consumption, then in two years another tranche will be needed," he said.

Kudrin also questioned the Ukrainian government's sudden change of course in refusing to sign an association agreement with the European Union.

"The Ukrainian economy has been stagnating longer than ours. In these conditions, Ukraine held negotiations on association for four years and suddenly in a week or two it decided that this is wrong. This is completely the responsibility of the government, which apparently either made a mistake or ignored the actual economic situation. The suppression of these expectations is what led to the protests. A pause is needed to resolve issues inside the country," Kudrin said. (rt/ez)