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Russia offers cheaper natural gas to Ukraine to join economic bloc

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(Credit: Reuters) A woman leaves a shop in the small Ukrainian town of Pustomyty, near the western city Lviv October 31, 2013.
Ukraine
December 1
8:11 PM 2013

Russian First Deputy Prime Minister Igor Shuvalov said Russia will offer Ukraine cheaper natural gas for as long as it will join an economic bloc led by Moscow. Ukraine had suspended talks to mend its economic ties with Russia and did not join in the signing of a European Union free-trade agreement last week.

In an interview with Bloomberg last month, Shuvalov said Ukraine will be able to solve its economic difficulties if it opts to integrate with Russia. He said, "No one other than Russia can provide Ukraine with the necessary funds so quickly and in such a quantity. A gas agreement could help relieve Ukraine of a huge problem. We can also give them a loan, but we will not help them without commitments on their part."

Ukraine is a vital route for natural gas shipments of Russia to the EU. Around 25% of the exports of Ukraine are bought by Russia and the EU. Russian President Vladimir Putin aims to form an economic bloc composed of former Soviet nations that would be able to rival the EU. This has led to a conflict with other EU leaders like Chancellor Angela Merkel of Germany, the report added.

Sixty percent of the natural gas in Ukraine is supplied by Russia. The latter had threatened trade measures against Ukraine if it pursues the EU agreement. Instead, Russia offered Ukraine to become a member in its customs union.

In a regional meeting last November 20, Russian Prime Minister Dmitry Medvedev told Mykola Azarov, his counterpart in Ukraine, that if Ukraine will sign the EU free trade accord, it would risk getting tariff levied on its goods from the union led by Russia. Ukraine then announced its plans to stop preparations to sign the EU agreement a day after the meeting in St. Petersburg occurred, the report said.

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