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Putin seals Russia-Ukraine gas deal, boosting EU energy security

Russia made unexpected concessions to Ukraine, averting a winter gas stand-off. Some saw a second deal: Vladimir Putin supporting Yulia Tymoshenko to sideline her rival, pro-West President Viktor Yushchenko.

By Correspondent / November 20, 2009

MOSCOWRussia and Ukraine stepped back Friday from the brink of repeating their annual winter "gas war" amid surprisingly warm smiles and handshakes between prime ministers Vladimir Putin and Yulia Tymoshenko.

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The Russia-Ukraine agreement, sealed after a night of talks in the Crimean resort city of Yalta, makes several unexpected concessions to Ukraine. Moscow agreed to an estimated 60 percent increase in transit fees paid by Russia's state gas monopoly Gazprom and to lifting stiff penalties that it could have imposed on Ukraine for not fulfilling its 2009 purchasing pledges. The bargain will also peg Ukrainian purchases of Russian gas to market rates for the first time.

"It would be very good to meet the New Year without shocks," Mr. Putin told journalists in Yalta Friday.

Ukraine and Russia have engaged in regular spats over gas supplies for the past four winters, since Russia sends gas westward through Ukraine, with a shivering western Europe watching anxiously downstream.

Chill in Ukrainian politics
Several times in the past few years, a stand-off between Russia and Ukraine has slashed energy supplies to Europe during the coldest winter months. Europe is heavily dependent on Russia gas, much of which is delivered via Ukraine's pipelines.

The problem has been aggravated by fierce geopolitical differences between Russia and the former Soviet state of Ukraine, especially President Viktor Yushchenko's insistence on bringing Ukraine into the NATO military alliance. Arguments between the two have seemed nearly incomprehensible due to a near total lack of transparency in the gas trade between Ukraine and Russia.

This year, there's an added twist – an escalating political battle between Ms. Tymoshenko and Mr. Yushchenko ahead of January presidential elections. The two former allies led Ukraine's 2004-05 Orange Revolution that unseated a pro-Moscow leader, but they now despise each other.

Reading between the lines of Friday's gas accord, some see Mr. Putin swinging Russia's considerable weight to subtly endorse Tymoshenko in her bitter struggle to succeed Mr. Yushchenko in the upcoming Ukrainian presidential polls, slated for Jan. 17.

'Yushchenko is out of the game'
On Thursday, Yushchenko, whose name is anathema in Moscow due to his pro-Western policies, dispatched an open letter to Mr. Medvedev, warning that Ukraine's economic crisis necessitated revisions in the two countries' gas accords, including a sharp increase in transit fees.

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