Ukraine-Russia. The big news is, of
course, the cheap gas for base agreement announced last week. Russia/Gazprom
(is there a difference?) will knock 30% off the going rate and the Sevastopol
lease will be extended to 2042. I don’t think that this is a very good deal for
either side: Moscow will pay more than it would cost to build a new base in
Russia and Ukraine will have another period of cheap gas that it will probably
use no more wisely than it has for the last 20 years. Plus all the
complications of a foreign (and sovereign) military base on its territory. (Although
apparently forbidden by Art
17 of the Constitution, the Constitutional Court approved it). And,
ten years down the road, a differently flavoured government in Kiev may seek to
reverse the base agreement. On the other hand, as I suspected, Ukraine has been
paying its gas
bill with IMF loans and, by all accounts, is pretty close to bankruptcy (this
seems to be Yanukovych’s justification).
Another benefit is that the price of gas for Ukraine is known for a long time
in the future, so downstream customers of Russian gas should be spared the
tense negotiations between Kiev and Moscow. The old base agreement had Moscow
give credits; this time it will pay cash (and more). So
everything is more transparent. The agreement appears to have opened up other
possibilities of mutual trade
and cooperation
so there may be good effects over time. The Ukrainian opposition is furious, of
course, but a poll
suggests that the agreement has good support in the country.
