Posted on April 21, 2010 - by Venik

Ukraine extends lease for Russia’s Black Sea fleet

Deal with new President Viktor Yanukovych to cut Russian gas prices sees Ukraine tilt backs towards Moscow

Ukraine’s president, Viktor Yanukovych, today agreed to extend the lease on Russia’s naval base in the Crimea, in the most explicit sign yet of his new administration’s tilt towards Moscow.

Yanukovych said the lease on Russia’s Black Sea fleet that was due to expire in 2017 will be prolonged for 25 years, until 2042 at least. His announcement follows a meeting with Russia’s president Dmitry Medvedev in Kharkiv, in eastern Ukraine. In return, Medvedev said Russia would offer Ukraine a discount on its gas bills: he said Moscow would slash the price Kiev pays for 1,000 cubic metres of Siberian gas by $100 (£65) from its current rate of $330, with a 30% discount if the price falls.

The deal is the most concrete sign yet that Ukraine is now back under Russia’s influence following Yanukovych’s victory in February’s presidential elections. It appears to mark the final nail in the coffin of the Orange Revolution of 2004.

Yanukovych’s predecessor, Viktor Yushchenko, had vowed to eject Russia’s Black Sea fleet from the port of Sevastopol, arguing that its presence was an affront to Ukraine’s sovereignty and a destabilising factor in Crimea, a majority ethnic Russian region with a strong pro-Soviet mood.

Today, Ukrainian officials insisted Ukraine still plans to join the EU, and to integrate with transatlantic institutions. “We want to move towards the west. But the best way of doing this is to get gas from the east,” a foreign ministry spokesman said. “The Black Sea fleet isn’t any threat to Ukraine’s independence.”

The agreement is a boost for Yanukovych as he tries to lever Ukraine’s economy out of severe recession, and to clinch a $12bn bailout loan from the IMF. Russia currently pays $90m per year for the base. It was not clear if the rent has now gone up. But the lease extension is likely to increase opposition to Yanukovych in Ukraine’s western provinces.

Ukraine’s split between the Russian-speaking east and Ukrainian-speaking west also is predominantly a political division, and leaders have always been forced to play a delicate balancing act for fear of upsetting either camp.

Russian gas company Gazprom said in a statement today that it has lifted all penalties for the failure to buy as much gas as contracted and said that the discounts for Ukraine “will not harm Gazprom’s financials.”

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