Blue &Yellow: Politics and Economics in Ukraine

Under the Kharkiv agreements of April 21, 2010, Russia granted Ukraine a 30 percent discount on the price of gas, relative to the January 2009 agreement concluded by the Tymoshenko government. In return for the favor, Yanukovych agreed with Russian President Dmitry Medvedev to prolong the stationing of Russia’s Black Sea Fleet on Ukraine’s territory until well into the 2040’s.

That discount notwithstanding, the gas price per one thousand bcm is rebounding to levels that hurt Ukraine’s inefficient steel and chemical industries. After a fleeting drop from $306 in the first quarter of 2010 to $233 in the second quarter (an immediate result of the Kharkiv agreements), the price rose to $249 in the third quarter, $252 in the fourth, $264 in the first quarter of 2011, $295 in this year’s second quarter, and is forecast at $300 on an annualized basis in 2011. The main factor behind the upward curve is the peg of the gas price to the cost of the oil products basket. The latter’s cost surge is attributed to the Arab turmoil, among other factors (Interfax-Ukraine, April 14, 21).

Excerpt from Eurasia Daily Monitor (Volume 8, Issue 79, "Yanukovych seeks new gas discount from Moscow", no link). The agreement was rubbish, [1]. The Russians received an amazing deal while the Ukrainians received a "discount". They had the punitive gas price set up by the 2009 agreement reduced, but accepted a 25 year lease on the Russian Crimea  naval base in exchange. One year later and another deal is needed to fix a deal that was meant to fix the 2009 deal.