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Ukraine's overall debt to Russia stands at $16 billion

Ukraine's overall debt to Russia stands at $16.6 billion, Russian Prime Minister Dmitry Medvedev said Wednesday at a meeting with President Vladimir Putin dedicated to the situation around Ukraine.

"Three billion dollars is Ukraine's debt, the accumulated gas debt stands at $2.2 billion, and what we consider Russia's profit shortfall stands $11.4 billion, which brings the total sum to $16.6 billion," Medvedev said.

"We use the same approach in regard to our Ukrainian partners as regarding other partners, the key principle is that contracts should be implemented," the Russian premier said.

He recalled that Russia and Ukraine have an agreement signed in 2009, which should be implemented. In his words, the document stipulates "a switch to the advance system of gas payments if the debt has not been repaid".

"We could have switched to the advance payment system earlier, but we did not do that because we understood the difficult economic situation in Ukraine," Medvedev said.

He said the 2009 contract is still valid, adding that "this is not contested by acting top officials in Ukraine". The premier added that "the gas price changed" after the Kharkiv Accords were denounced but that "common approaches remained".

"If such a critical situation continues, there are all grounds for advance payments," Medvedev said.

He called "an outrage" Ukraine's accumulated debt for supplied Russian gas.

Meanwhile, Putin has asked the Russian government and Russian state energy giant Gazprom to avoid switching to the advance gas payments system for Ukraine until additional consultations are held, should Kiev agree to them.

Russian Energy Minister Alexander Novak said at the government meeting on Wednesday that as of April 9, Ukraine's gas debt stands at $2.24 billion.

Gas price and Ukrainian crisis

Russia slashed the natural gas price for Ukraine to $268.5 from nearly $400 per 1,000 cubic meters and decided to provide its neighbor with a $15 billion loan after an association agreement with the European Union was shelved last year.

Kiev suspended work on the association agreement with the EU a few days prior to the Eastern Partnership summit in Vilnius in November 2013.

The Eastern Partnership program is an EU project to develop ties with Armenia, Azerbaijan, Belarus, Georgia, Moldova, and Ukraine.

The Ukrainian authorities refused to sign the deal at the Vilnius summit, opting for closer ties with Russia instead. Kiev's refusal triggered mass anti-government protests in Ukraine, dubbed "Euromaidan", which often turned violent.

Russia-Ukraine relations deteriorated following a coup in Ukraine in February after months of these protests. New people were brought to power in Kiev amid deadly riots that involved radicals after President Viktor Yanukovich had to leave Ukraine citing security concerns in February.

Moscow does not recognize the new self-proclaimed Ukrainian authorities, who appear unable to restrain the activity of radicals and ultranationalists in the country.

Following the coup in Ukraine, Russia decided to suspend the allocation of the regular tranche of its financial aid package to Ukraine.

Ukraine's political and economic crisis and Kiev's ties with Moscow soured further when the Republic of Crimea, where most residents are Russians, held a referendum March 16 in which an overwhelming majority of Crimeans voted to secede from Ukraine and reunify with the Russian Federation. The admission deal with Moscow was signed March 18.

The new Ukrainian leadership and the West do not recognize Crimea part of Russia despite repeated statements by Putin and other Russian officials that the Crimean referendum complied with the international law and the UN Charter, and was also in line with the precedent set by Kosovo's secession from Serbia in 2008.

In the Soviet Union, Crimea used to be part of Russia until 1954, when it was gifted to Ukraine by Soviet Communist Party leader Nikita Khrushchev.

In the second quarter of 2014, the price for Russian gas for Ukraine was set at $385.5 per 1,000 cubic meters. Gazprom said earlier that the price rose from $268.5 due to the return to earlier contract agreements, as Ukraine failed to fulfill its commitments under an additional agreement concluded in December 2013, which obliged the country to pay for supplied volumes of Russian gas in time.

On April 2, Putin signed a law on denunciation of the Kharkiv Accords with Ukraine, which were struck in 2010 and stipulated that Russia's lease of naval facilities in Crimea (then part of Ukraine) will be extended by 25 years beyond 2017 - until 2042.

The Kharkiv deals envisioned a discount of $100 per 1,000 cu m on Russian gas for Kiev. Now that the accords have been denounced due to Crimea's accession to the Russian Federation, the discount will no longer be applied, raising the gas price by another $100 to $485.5 per 1,000 cubic meters, which is expected to make the economic situation in Ukraine even more complicated.

[Source: Itar Tass, Novo-Ogarevo, 09Apr14]

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