KYIV, Ukraine—Ukraine has won its battle for cheaper gas from Russia, and in exchange, has agreed to allow the Russian navy to remain long-term in the Crimean Peninsula.
Since Ukraine’s new President Victor Yanukovych took office in February, he has been seeking to negotiate lower consumer gas prices. Expensive gas has been a burden on the ailing Ukrainian economy, making it difficult for the state to pass a budget.
President Yanukovych and Russian counterpart Dmitriy Medvedev, met on Wednesday in the former Ukrainian capital of Kharkiv to finalize the deal.
Under the agreement, Ukraine will receive a $100 discount per 1,000 cubic meters if the price climbs higher than $330 per 1,000 cubic meters, and a 30 percent discount if the price is below that level.
Pro-Russian President Yanukovych says the discount should save his country about $4 billion a year.
The head of Russian state-run gas company Gazprom, Alexey Miller, said that the price adjustment should not impact the company’s overall budget.
In January 2009 then Ukrainian Prime Minister Yulia Tymoshenko signed a 10-year gas contract with Russia. That deal followed a conflict that left some Eastern European consumers without Russian-supplied gas for two weeks during the winter.
According to that contract, gas prices were adjusted quarterly. Most recently the price had been $330 per 1,000 cubic meters.
Inside the deal
Medvedev announced that tied to the gas discount, Ukraine would be extending the Russian navy’s right to be in the Black Sea by another 25 years beyond the original contract date, which had been set to expire in 2017. The fleet will now be allowed to stay until 2047.
Ukrainian opposition politicians did not greet the deal with cheers. They claim that the extension violates the constitution, which prohibits foreign countries from keeping a military base in Ukraine after 2017. The 2017 agreement had been signed with Boris Yeltsin in 1991.
Opposition member Arseniy Atsenuk said in a statement on Wenesday that the decision was unconstitutional and any change to the terms of that agreement would need to be confirmed in a national referendum, then ratified by Parliament.
The existence of a Russian fleet in Ukrainian waters has been a sensitive issue since Ukraine’s former president, Victor Yushchenko, came to power in the 2004 Orange Revolution. He considered the navy dangerous for the country’s sovereignty, a stance that irked Russia.
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