Russia gives Ukraine cheap gas, multibillion dollar loan

Putin described Ukraine as Russia’s strategic partner. Source: Konstantin Zavrazhin / RG

Putin described Ukraine as Russia’s strategic partner. Source: Konstantin Zavrazhin / RG

The deals reached Tuesday mark a vital restoration of ties between Ukraine and Russia, which have been by strained by Kiev’s previously stated intention to seek a closer economic relationship with the European Union.

Russia on Tuesday sharply lowered natural gas prices for Ukraine and provided its economically struggling neighbor with a multibillion loan package in a move that Ukraine’s government may hope will spell an end to ongoing street protests.

President Vladimir Putin announced at a meeting with his Ukrainian counterpart in Moscow that Russia will sell gas to Ukraine’s Naftogaz energy company for $268.5 per 1,000 cubic meters, well below the current level of more than $400. Putin said, however, the price may only be lowered temporarily.

“We believe this is a temporary decision, by which it is mean that long-term agreements should and will be signed. This concerns both supplies to Ukraine and securing uninterrupted transit to our consumers in Europe,” Putin said after the meeting.

Russia will also dip into its national wealth fund to buy $15 billion in Ukrainian eurobonds, Putin said. That will provide desperately needed liquidity for Ukraine, which is currently facing a looming balance of payments crisis.

“These will be eurobonds, part of them this year, another next year. The smallest part, naturally, this year,” Russia’s Finance Minister Anton Siluanov said.

At the start of a meeting between the Russian leader and Ukrainian President Viktor Yanukoyvch, Putin said he hoped Tuesday to reach a breakthrough in sensitive issues for both sides, and described Ukraine as Russia’s strategic partner.

Putin lamented that bilateral trade had dropped by 14.5 percent over the past two years and said firm action was needed to restore the health of economic ties.

The deals reached Tuesday mark a vital restoration of ties between Ukraine and Russia, which have been by strained by Kiev’s previously stated intention to seek a closer economic relationship with the European Union.

Even though Putin has regularly insisted that no pressure was being applied to Ukraine, Kremlin officials have openly threatened Ukraine in the past that any EU trade deal would preface trade embargoes.

Earlier this year, Russia cited hygiene concerns when it slapped an import ban on the products of a major Ukrainian major candy maker that provides work for thousands of people.

Russia’s state-run energy giant Gazprom is still owed more than $2 billion for unpaid natural gas and has warned it could in future begin demanding advance payment for the fuel.

First published by RIA Novosti.

All rights reserved by Rossiyskaya Gazeta.

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