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Energy in 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.

The cost of Russian gas supplied to Ukraine has been slashed by 33 percent

The cost of Russian gas supplied to Ukraine has been slashed by 33 percent

“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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Differences between Russia and Ukraine on reducing the price of Russian gas have been narrowed after talks in the Black Sea resort of Sochi, Russian officials announced.

President Vladimir Putin’s spokesman Dmitriy Peskov said the talks would continue at a later date.

Ukraine’s President Viktor Yanukovych and his Russian counterpart Vladimir Putin had been expected to debate Kiev joining a Moscow-led customs union.

But Dmitry Peskov said the issue was not discussed.

Last month Viktor Yanukovych shelved a partnership deal with the EU, triggering angry protests in Ukraine’s capital Kiev.

Russia was unhappy with the deal and Vladimir Putin has been urging Ukraine to join a Russian customs union with Belarus and Kazakhstan.

The two neighbors have also been trying to resolve a long-running dispute over energy supplies.

Ukraine's President Viktor Yanukovych and his Russian counterpart Vladimir Putin

Ukraine’s President Viktor Yanukovych and his Russian counterpart Vladimir Putin

Ukraine depends on imports of Russian gas, but the supplier, Gazprom, has recently complained that Kiev had fallen behind in payments.

Disputes over supplies to Ukraine before 2009 saw Gazprom temporarily cutting off supplies.

Pipelines passing through Ukraine also pump Russian gas to many EU member states.

Dmitriy Peskov told Interfax news agency that “great attention has been devoted to the co-operation in the energy sphere”.

“Both sides narrowed the gap between their positions as a result of the discussion. However, no final agreement has been reached.”

He added: “The issue of Ukraine joining the customs union was not discussed during the meeting in Sochi.”

Ukraine has so far not commented on the talks.

Correspondents had earlier speculated that an agreement on Ukraine joining the customs union might be reached in return for reduced energy prices.

Many Ukrainians were furious that Viktor Yanukovych refused to sign the association agreement with the EU, which had followed years of negotiations.

On Saturday, nearly 1,000 supporters of the EU deal braved snow and swirling winds as they maintained control of Kiev’s Independence Square for the seventh successive day.

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