KIEV, Dec. 18 – Prime Minister Mykola Azarov on Wednesday said that Ukraine averted ‘bankruptcy’ and ‘social collapse’ by signing an agreement with Russia on $15 billion loan and lower natural gas prices.

Azarov said Ukraine avoided the disaster by refusing to sign political association and free trade agreements with the European Union on November 29.

“This would trigger the bankruptcy and the social collapse,” Azarov said opening a meeting of the government a day after Ukraine had signed the Russian gas price and loan deals. “That’s a sort of a New Year’s present that would have waited for Ukraine in this case.”

Azarov’s wording repeats almost exactly the doomsday scenario that had been earlier presented by a top economic aide to Russian President Vladimir Putin as he tried to dissuade Ukraine against signing the agreements with the EU.

The sudden reversal of Ukraine’s foreign policy away from closer ties with the EU and towards closer alliance with Russia triggered political crisis in Ukraine with people taking to the streets with massive protests.

The protesters demanded Azarov’s dismissal in order to reinstate Ukraine on the course towards signing the agreements with the EU.

But President Viktor Yanukovych rejected these demands and went ahead to sign the deal with Russia to lower gas prices by 33% in 2014 and securing $15 billion loan.

Yanukovych “has managed to negotiate an economically feasible price of natural gas starting January 1,” Azarov said.

“Overall, we signed a broad package of agreements that open good prospects for the Ukrainian economy for the coming years,” Azarov said. “These also enable the government to adopt a budget today.”

The government, after a four-month delay, on Wednesday voted to approve the 2014 budget draft that now will be submitted to Parliament for approval, he said.

By signing the agreement with Russia, the government will be able to get the money without introducing painful, but important economic reforms.

The IMF demanded Ukraine to hiking domestic gas prices and to weaken the value of the hryvnia, the local currency, against the U.S. dollar as conditions for $15 billion loan package, Azarov said.

“Ukraine would have been covered by the tough reality,” Azarov said. “We would have been forced to accept the IMF’s demands, doubling utilities prices, steeply devaluating the national currency and reducing budget spending.”

Now, none of there reforms will be implemented. “We put a period in these discussions,” Azarov said.

The admission by Azarov that Ukraine was on the verge of the financial collapse shows that the government has mismanaged the economy badly, and now must bear responsibility, said Ihor Yeremeyev, an independent lawmaker who owns a chain of gasoline stations in Ukraine.

“If the Cabinet says we are on the verge of collapse, if this is the result of the past 3 years of their management, then this means they failed,” Yeremeyev told Radio Liberty.

“Ukraine has the lowest gas price in Europe over the previous 20 years and what we have done with that resource? Did we upgrade steel mills? Did we modernize factories? Did we spend money on energy-saving technology? No,” he said.

"So it is safe to assume that these [Russian] funds will disappear as they have disappeared over the past 20 years.” (tl/ez)