March 5, 2010 / 6:52 PM / 9 years ago

New Ukraine leader soothes Russia, no gas deals

MOSCOW (Reuters) - Ukraine’s new president Viktor Yanukovich soothed Moscow Friday by suggesting he would reverse key policies of his pro-Western predecessor, but won no public promise that Russia will lower Kiev’s onerous gas bills.

Ukraine's President Viktor Yanukovich (2nd L) approaches to shake the hand of Russia's Prime Minister Vladimir Putin (R) as they meet in Moscow March 5, 2010. Ukraine's new president Viktor Yanukovich soothed Moscow on Friday by suggesting he would reverse key policies of his pro-Western predecessor, but won no public promise that Russia will lower Kiev's onerous gas bills. REUTERS/Sergei Karpukhin

Making a state visit to Moscow a week after his inauguration, Yanukovich said his five-year presidency is a chance to “open a new page” in ties between the Slavic neighbors after half a decade of increasing acrimony.

Russian President Dmitry Medvedev said both leaders would “do everything” to put ties back on track.

“We are talking not about the development of relations but about their rebirth,” he said.

Yanukovich suggested he would let Russia’s Black Sea Fleet remain at its base in the Crimean peninsula port of Sevastopol after the current lease expires in 2017. Former President Viktor Yushchenko had stressed he wanted Russia out by the deadline.

Yanukovich also said he would scrap orders Yushchenko signed which elevated two World War II-era nationalists reviled by Russia to the status of “Heroes of Ukraine.”

Ukraine's President Viktor Yanukovich looks on during a meeting with Russia's Prime Minister Vladimir Putin in Moscow March 5, 2010. Ukraine's new President Yanukovich soothed Moscow on Friday by suggesting he would reverse key policies of his pro-Western predecessor, but won no public promise that Russia will lower Kiev's onerous gas bills. REUTERS/Sergei Karpukhin

The decrees angered Ukraine’s former imperial master Russia and increased its distaste for Yushchenko, who pushed his nation toward NATO and sought to shed Moscow’s influence.

Despite Friday’s warm talk, there were fewer signs of solidarity on the economic issues that will continue to dominate relations between energy giant Russia and Ukraine, a key export route for Russian oil and gas headed for Europe.

“POISONED CHALICE”

Russian Prime Minister Vladimir Putin forged a long-term gas deal in 2009 with Yanukovich’s election rival, former Prime Minister Yulia Tymoshenko, removing preferential price treatment for Ukraine and bringing rates paid in line with the market.

Many analysts believe Kiev’s desperate public finances mean Yanukovich must push for change in the long-term gas deal.

“He’s inherited the proverbial poisoned chalice in the economy and will need to do deals with both Russia and the EU,” said Chris Weafer, chief strategist at investment bank Uralsib.

But neither Medvedev nor Putin discussed the gas pricing with Yanukovich, Russian officials said. They suggested it would be addressed once Yanukovich forms a government in Ukraine.

Slideshow (2 Images)

Yanukovich’s first foreign destination as president was Brussels, where he assured the European Union Monday that Ukraine will be a reliable gas transit route.

Europe, which gets a fifth of its gas needs from Russia via Ukraine, is hoping warmer Moscow-Kiev ties will prevent repeats of price disputes which have led to supply cuts to Europe.

The Kremlin Thursday said Ukraine should not seek to revise gas contracts. But Russian daily Kommersant reported on Friday that Ukraine will offer Moscow a one-third stake in the management of its gas pipelines in exchange for deep price cuts.

Ukraine’s acting prime minister and Yanukovich rival Oleksander Turchinov, said giving Moscow any control over the pipelines would be “a betrayal of national interests.”

Yanukovich has pleased Russia by making clear he opposes Ukraine joining NATO. But analysts have said Yanukovich would have to offer Moscow bigger incentives, such as a deal for the Black Sea Fleet to stay on, to win lower gas prices.

Yanukovich may also seek to convince Russia not to proceed with Nord Stream or South Stream, pipelines that would bypass Ukraine in delivering gas to Europe and cut Kiev’s revenues.

At the Kremlin, Medvedev and Yanukovich signed a declaration vowing to boost economic ties “in every way possible.”

But an exchange between and Yanukovich and Putin underscored the limits. When Yanukovich said Ukraine wants “a sharp turn” in ties, Putin said curtly, “Join the customs union,” referring to a trade group linking Russia, Belarus and Kazahstan.

Ukraine is in the World Trade Organization and is unlikely to join the union.

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