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21 Mar, 2014 09:48

Russia may revoke fleet hosting deal with Ukraine, demand $11 bn back – Medvedev

Russia may revoke fleet hosting deal with Ukraine, demand $11 bn back – Medvedev

Russia may revoke a deal with Ukraine, which gave Kiev a considerable discount on gas in exchange for hosting the Russian Black Sea fleet. The Russian PM said this would oblige Kiev to return $11 billion which Russia paid to lease the bases.

The deal, which was signed in 2010 in Kharkov, extended permission to Russia to keep the Black Sea fleet at its base in Sevastopol for 25 years after 2017, when the current agreement was due to expire. In exchange Moscow offered Ukraine incentives, including a discount on the price of gas and a waiver for some payments to Russia.

“We started doing this [not requiring the payments from Ukraine – RT] immediately, even though the remaining time for hosting the base under the older document was quite long,” Medvedev pointed out. “So Ukraine in fact saved about $11 billion in unpaid payments while the budget of the Russian Federation sustained damages for the same amount.”

Medvedev said that now, with Crimea joining Russia, the Kharkov agreement is no longer applicable and should be ended. In that case Russia may seek the return of the $11 billion through the relevant courts.

“Of course these are harsh measures, but on the other hand there is no agreement, and there is the payment we did. Our Ukrainian partners must understand, that one doesn’t get paid for nothing,” Medvedev said.

On Thursday a Gazprom representative told Izvestia newspaper the cancellation of the Kharkov agreement could push the price of Russian gas to $500 per 1,000 cubic metres.

Ukraine running on empty

The PM’s statement comes at a time when the Ukraine economy is struggling for cash, with Russian officials insisting they were the first to be interested in Ukraine’s economic stability.

The country’s treasury is almost empty, as Ukraine’s government debt stood at about $66 billion in 2012, which is 37.42 percent of GDP.

The country owes about $2 billion to Russia’s Gazprom, with the company insisting that it didn’t want a gas crisis similar to 2009. The company’s CEO Aleksey Miller said he doesn’t want Ukraine’s economy to collapse, and wasn’t asking for something extra, like advance payments.

Talking about Russia’s $3 billion loan tranche made in December, Deputy Russian Finance Minister Sergey Storchak said Russia won’t require early repayment of the debt, as it is interested in stabilizing the economic situation in Ukraine.

Under the terms of the Russia-Ukraine deal signed in December, Ukraine's debt shouldn’t exceed 60 percent of GDP. This means that technically Russia has the right to demand the money back before the bonds are due in 2015.