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Russia Grants Ukraine Gas Discount In Return For Fleet Lease Extension

Ukraine's President Viktor Yanukovych (right) with his Russian counterpart Dmitry Medvedev in Kharkiv
Ukraine's President Viktor Yanukovych (right) with his Russian counterpart Dmitry Medvedev in Kharkiv
By RFE/RL
Ukraine has agreed to a lengthy extension for the Russian Black Sea Fleet's base in Crimea in exchange for a major discount on Kyiv's imports of Russian gas.

The lease on the base will be extended for another 25 years beyond the current term, which was due to expire in 2017. In return, Russia has pledged to cut the price Ukraine pays for Russian natural gas.

Russian President Dmitry Medvedev announced the landmark agreement today after talks with newly elected Ukrainian President Viktor Yanukovych in the eastern Ukrainian city of Kharkiv.

"Russia needed certainty about its navy base stationed [in Crimea] and now we have that certainty. We have signed an agreement that extends the stay of the Russian base on Ukrainian territory for another 25 years," Medvedev said.

Medvedev also explained the details of the gas rebate Ukraine will receive: "Our Ukrainian partners will get a $100 discount on the price of gas if the price is higher than $330 per 1,000 cubic meters, or a 30-percent discount if the price is lower [than $330]."

The deals, which Yanukovych hailed as "unprecedented in the history" of Ukrainian-Russian relations, are a clear signal of the warming ties between the two countries after years of hostility.

Moscow had been unable to win a lease extension from Yanukovych's predecessor, Western-leaning Viktor Yushchenko, who perceived the Russian fleet as a hostile presence on Ukrainian soil.

IMF Credit

Ukraine's new government, in turn, badly needed a Russian gas discount to secure the resumption of a credit from the International Monetary Fund that is vital to helping the nation's battered economy recover from the global downturn.

Ukraine had been paying over $300 per 1,000 cubic meters of gas under a 10-year deal negotiated last year by Yushchenko's government, whose drive to bring Ukraine into NATO had angered Moscow.

Although Medvedev is visiting Ukraine for the first time since Yanukovych's February election, the two leaders have met five times over the past two months, with Medvedev due to travel to Ukraine again in May.

Signaling the importance of today's talks, Ukrainian Prime Minister Mykola Azarov had met his Russian counterpart Vladimir Putin in Moscow on April 20 to finalize issues ahead of the Kharkiv talks.

The extension of the Russian fleet's lease, however, is likely to draw strong criticism from Ukraine's political opposition, which had insisted on the scheduled 2017 pullout.

Former Ukrainian Prime Minister Yulia Tymoshenko, who lost the presidential election to Yanukovych after a bitterly contested race, blasted the fleet deal as unconstitutional and accused her former rival of "treason."

"This step by Yanukovych shows that Ukraine does not have a president," she said. "This is a person who obtained his post by dishonest means, who for the sake of whitewashing his own image and gaining support from other countries is essentially flouting the constitution and completely destroying Ukraine's national interests today."

Tymoshenko said her parliamentary faction intends to introduce a draft resolution in the Verkhovna Rada annulling the deal on the Black Sea Fleet.

with agency reports
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by: Nick from: New York City
April 22, 2010 21:21
The Russians really got the better of the deal. Now lets do the arithmetic....If the gas is higher than $330 then the Ukrainians get $100 discount. What if the price of gas in 2023 is $630. The Ukrainians still get a $100 discount? That is a joke. And seriously does anyone think that the price of gas will be lower that $330 in 2013 or 2025? And then the Ukrainian get a 30% discount. That too is a joke. Would it not have made more sense to negotiate the price based on percentages? The Ukrainian have the Russians by the short hairs regards the naval base in the Crimea. And they did not know how to take advantage of that situation. It goes to show you that Yanukovych is kissing Moscows behind in this deal. What a shame.

by: ukr fan from: Canada
April 23, 2010 03:00
What is wrong with the people of Ukraine; firstly by electing such an ineffectual leader, and secondly by letting him extend the lease on the Black Sea fleet? Can't they think for themselves?
When I visited Ukraine they seemed to be a logical, reasonable and proud people and now they resort to having someone lead them who knows nothing about leadership; he is just a puppet for Russia.

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