Russia cuts gas price for Ukraine

Russia has decided to cut the price of the gas supplied to Ukraine from more than $400 (291 euros) per 1,000 cubic metres to $268.5.

Russia also agreed at talks in the Kremlin to buy $15 billion worth of Ukrainian government bonds.

President Vladimir Putin and his Ukrainian counterpart Viktor Yanukovych did not talk about Ukraine joining a Russian-led customs union.

Protests continued in Kiev over the deepening ties with Russia.

Victor Yanukovych’s U-turn on an EU association agreement deal last month sparked mass demonstrations.

He admitted his decision had been influenced by heavy pressure from Russia.

The current protests, the largest since Ukraine’s 2004 Orange Revolution, are pushing for the resignation of Viktor Yanukovych and his government, and snap elections.

The gas agreement signed between Russia’s Gazprom and Ukraine’s Naftogaz amends a controversial 2009 deal signed by former Ukrainian PM Yulia Tymoshenko, for which she was jailed two years ago.

Ukraine relies on imports of Russian gas – and heavy energy-intensive industries in eastern Ukraine are especially anxious to keep the price of gas down. Some 75% of Ukraine’s engineering exports go to Russia.

“Russia and Ukraine are… united both by many centuries of our friendship and by having lived a long time together in the same country,” Vladimir Putin said.

Trade between the two countries, he said, had dropped over the past two years, by 11% in 2012 and 14.5% this year.

“It is of course time to take vigorous action not only to return to the level of previous years, but also create conditions for moving forward,” he added.

Viktor Yanukovych said Ukraine would work with Russia and other ex-Soviet states to implement the free trade deal they signed two years ago.

“In the near future, we will not only have to co-ordinate this work between our countries, between Russia and Ukraine, but with other CIS [Commonwealth of Independent States] countries as well, so that our free trade area could finally start operating at its full capacity,” he said.

With talks on resuming credit from the International Monetary Fund stalled, Ukraine requires urgent financial assistance in the coming months to keep the economy afloat.

Kiev also needs to find about $17 billion next year to pay its outstanding gas bill to Russia.

Meanwhile, EU foreign ministers on Monday used a high-level meeting to reassure Russia that the association agreement with Ukraine would not undermine Moscow’s interests.

Supporters say closer ties with the EU could make the economy more open, transparent and prosperous, with greater competition and protection for investors.

But the EU partnership requires far-reaching and expensive reforms, which the government says would put at risk many enterprises reliant on trade with Russia.

Moscow has already put economic pressure on Ukraine, with customs delays and a ban on Ukrainian chocolates, and could escalate such measures.

Russia fears that such a deal would damage the country’s economy by letting in a massive flow of EU products via Ukraine.

Moscow wants Kiev to join the Customs Union instead of signing the EU pact.

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