YALTA, Ukraine, Sept 21 Ukraine's prime minister
sought on Saturday to calm Russian fears over Kiev's plans to
sign a free trade pact with the European Union, saying in
practice there would be no threat to Russia's home market.
Moody's Investor Service cut Ukraine's sovereign credit
rating on Friday, partly on concern over relations with Russia.
Speaking at an international conference in the Black Sea
resort of Yalta, Mykola Azarov also expressed frustration at
Russia's refusal to reduce the price of its gas sales to the
ex-Soviet republic and said Kiev may be obliged to reduce
further the volume of its gas imports.
Azarov's government approved plans this week to sign
landmark agreements in November with the EU on political
association and free trade - drawing new threats of retaliation
from Russian President Vladimir Putin.
Russia says it fears its market could be flooded by
competitive EU goods entering Ukraine free of import duties and
being re-exported across the long border with Russia. It says it
will introduce counter-measures to mitigate damage and has
invited Kiev to join a Russian-led customs union.
Azarov dismissed the threat of illegal transit of EU goods
into Russia as "hypothetical" and one which in practice would
"We are convinced that the signing (of the agreements with
the EU) does not hold any risks (for Russia)," he said, adding
that he would give personal assurances of this to Russia and its
trade allies in the Moscow-led Customs Union.
But he had sharper words for Russia over its refusal to
bring down the price of gas supplies to Ukraine which hangs
heavily on the country's cash-strapped economy.
Ukraine pays what it sees as an exorbitant price of more
than $400 per thousand cubic metres under a 2009 contract which
Russia has refused to revise despite pleas by the Azarov
In a bid to break away from reliance on Russia, Ukraine is
trying to secure alternative energy sources by stepping up
domestic gas production, reaching shale gas and off-shore deals
with Western companies, and possibly bringing in liquefied gas
from foreign suppliers.
Azarov said Ukraine was pressing ahead with "a serious
restructuring" of its energy policy to diversify energy sources.
"Over 3 1/2 years we have reduced our purchases of Russian
gas from 41 billion cubic metres to 25 billion and we are
frankly telling our Russian partners that if the contract, which
they managed to acquire in 2009, is not re-drafted, changed,
then we will go even further down the road of reducing purchases
of Russian gas," he said.
Ukrainian President Viktor Yanukovich on Friday re-iterated
that Kiev was committed to signing the key agreements with the
EU at a late November summit in Vilnius, Lithuania, marking a
pivotal shift away from its former Soviet master Russia towards
integration with Europe.
But he refused to say whether he would free from prison his
political rival, former prime minister Yulia Tymoshenko, who the
EU says is a victim of 'selective justice'.
Tymoshenko was jailed in 2011 for seven years for abuse of
office after a trial which she says was a vendetta by
Yanukovich, and her continued imprisonment could still threaten
the signing of agreements in Vilnius.
Moody's cut Ukraine's sovereign debt rating by one notch to
Caa1 from B3, citing concerns over foreign currency reserves,
new debt issuance and potentially worsening ties with Russia.
Moody's said it welcomed the forthcoming EU trade pact as
positive overall for Ukraine in the medium term, but added: "The
short-term credit negative impact of a negative reaction by
Russia outweighs these benefits."