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Medvedev in Ukraine: 'Witch hunt is over'

May 17, 2010 at 2:11 PM   |   Comments

KIEV, Ukraine, May 17 (UPI) -- Russian President Dmitry Medvedev was in Kiev for talks focusing on Russian-Ukrainian energy relations.

Medvedev and his Ukrainian counterpart Viktor Yanukovych on the first day of a 48-hour trip Kiev signed several bilateral agreements, with talks focusing mainly on the country's gas sector.

Medvedev said he and Yanukovych would give "all of the necessary signals that we are open to mutual investment, that the era of witch hunts has passed, that investment from our countries is mutually welcomed, and that a proper level of protection for them is ensured," he told journalists in Kiev Monday, Russian news agency Interfax reports.

Ukraine is a key energy transit country for the European Union. Nearly 80 percent of Russian gas exports to Europe are sent through Ukraine, satisfying one-fifth of the continent's demand.

In the past years, gas conflicts between Russia and Ukraine temporarily halted supplies to Europe, damaging Kiev's reputation as a reliable transit country.

Yet relations between Kiev and the Kremlin have dramatically improved since Yanukovych took office in February.

Russia last month awarded Ukraine gas price discounts worth as much as $45 billion in return for a 25-year extension of the lease on Russia's Black Sea Fleet base in Crimea.

The deal has infuriated the opposition, which claims the government is undermining Ukraine's sovereignty. Yanukovych says the gas discount is vital to the Ukrainian economy and European energy security.

Yanukovych had also scrapped plans by the previous government to modernize the gas sector exclusively with the EU.

Russian Prime Minister Vladimir Putin this month proposed to merge Gazprom with Ukraine's state-owned energy company Naftogaz. While Yanukovych said only a 50-50 merger would be acceptable -- a condition Gazprom is not likely to agree to -- the proposal nevertheless underscores the improving relations.

Yanukovych is eager to modernize the gas sector, but he does not have the $500 million to $600 million to do so. Ukraine's economy is in shambles and the national budget overstretched.

The EU is willing to help but only if Ukraine increases market transparency, privatizes Naftogaz (which owns the gas grid) and raises gas prices for domestic consumers to avoid inefficiencies.

Yanukovych has previously indicated he might hand the Ukrainian gas network to a consortium comprised of Ukrainian transit companies, Russian state-controlled energy giant Gazprom and Western European energy companies to safeguard Ukraine's role as a key transit country.

© 2010 United Press International, Inc. All Rights Reserved. Any reproduction, republication, redistribution and/or modification of any UPI content is expressly prohibited without UPI's prior written consent.
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