Yanukovich, under fire, defends deal with Russia

The newly elected Yanukovich came under his first real fire from the opposition for granting a 25-year extension to Russia's lease of a Black Sea base in Sevastopol for its fleet beyond 2017.

For his opponents, it validated their election charges that he would shift the ex-Soviet republic back into Russia's sphere once he was in power.

The Our Ukraine party of his pro-Western predecessor, Viktor Yushchenko, called for his impeachment -- though analysts gave this little chance of progressing -- and the opposition threatened to blockade a key parliamentary session next week.

But Yanukovich justified Wednesday's deal with Russian President Dmitry Medvedev on economic grounds.

Assuming imports of 30 billion cubic meters of gas this year, Ukraine would pay about $3 billion less than previously, Yanukovich told a news conference. From next year, there would be a saving of $4 billion annually.

"This decision will give us the chance of really helping our economy ... We have boosted confidence in the economy," he said.

He said it would not require the government to raise the price of gas for households and public utilities.

Russia agreed on Wednesday to a 30 percent cut in the gas price in exchange for the Black Sea fleet concession.

The new Ukrainian leadership needs a lower price for its huge gas imports from Russia to nail down the detail of a 2010 draft budget and secure a $12 billion credit line from the International Monetary Fund.

Fresh credit from the IMF, after the suspension of an earlier $16.4 billion program, is seen by the Yanukovich administration as vital for helping the economy recover from the global downturn, which battered its main export industries.

With cheaper gas, the way is clear for the government of Mykola Azarov to put together a draft budget with a relatively tight deficit target of 6 percent as sought by the IMF.

Yanukovich's camp hopes to be able to hustle this through parliament next week and secure the nod from the IMF for the $12 billion credit being sought.

Loss of Sovereignty

The departure of the Russian fleet had long been sought by Yushchenko, who saw it as an insult to Ukraine's independence.

To his anger, Russia used ships from its Black Sea fleet against his ally Georgian President Mikheil Saakashvili in the brief war in August 2008.

Ukraine's constitution is ambiguous on the status of foreign bases on its territory.

But Valentin Nalivaychenko, Yushchenko's former state security chief, said on Thursday ratification of the Black Sea fleet extension would mean a loss of independence and violate the country's non-bloc status.

Yanukovich, who says his foreign policy is aimed at steering a middle distance between Russia and Europe, avoided any discussion of sovereignty.

In answer to a journalist, he raised the prospect of a referendum on the subject, but analysts expected ratification by parliament next week despite opposition protests.

Russian Prime Minister Vladimir Putin said on Thursday Russia will not offer gas in exchange for military bases around the world, ruling out similar deals to that agreed with Ukraine.

At a NATO meeting in Estonia, Secretary-General Anders Fogh Rasmussen said Ukraine's signing of the agreement with Russia did not affect its prospect of eventually joining NATO.

Medvedev and Yanukovich on Wednesday spoke warmly of turning a new page after five years of frosty relations under the pro-NATO Yushchenko and the stage seems set for a successful official visit by the Kremlin chief in mid-May.

[Source: By Richard Balmforth, Reuters, Kiev, 22Apr10]

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