Ukraine, Russia ink gas deal

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Ukraine, Russia ink gas deal

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Ukraine has struck a deal with Russia to cut gas import prices by 30 per cent, heralding a new era of warmer ties between the two countries.

Kiev needs cheaper gas to reduce its budget deficit and secure a 12-billion-dollar (nine-billion-euro) credit line from the International Monetary Fund.

Ukraine has been hit hard by the global economic downturn amid a sharp drop in demand for its exports. Its economy shrank by 15 percent last year.

The energy deal means Ukraine will pay Russia approximately 230 dollars per cubic metre of gas. Ukraine currently pays 334 dollars per cubic metre.

The improvement in Moscow-Kiev relations follows the election of pro-Kremlin President Viktor Yanukovich in March.

Russian President Dmitry Medvedev also agreed to invest the equivalent of 40 billion dollars in Ukraine over the next ten years, while Yanukovich allowed Moscow to keep its Black Sea fleet at the Ukrainian port of Sebastopol until 2042.

Russia has maintained a naval base there throughout Ukraine’s independence and her presence has often sparked diplomatic squabbles between the two governments.

The previous Ukrainian leader Viktor Yushchenko had threatened to terminate the port’s lease , which had been due to run out in 2017.