Russia Urges Ukraine to Join Customs Union After EU Snub

Russian President Dmitry Medvedev reiterated calls for Ukraine to join a regional customs union after the European Union postponed a meeting with Ukrainian leader Viktor Yanukovych to discuss closer ties.

Ukraine shouldn’t underestimate the potential of the union of Russia, Belarus and Kazakhstan, particularly during recent global financial instability, Medvedev said today.

“We must do everything so that our cooperation doesn’t weaken but gets stronger,’’ he told an economic forum in Donetsk, in eastern Ukraine. “Today’s reality is that not only states but also so-called cross-border and regional associations are becoming influential economic players.’’

Russia has said Ukraine’s entry into the union may help its request for cheaper natural-gas prices from its neighbor. While Yanukovych has sought to bolster ties with Europe, last week’s jailing of former Prime Minister Yulia Tymoshenko for abuse of office sparked criticism from EU officials, who deem her conviction politically motivated.

Ukraine is discussing cooperation with the customs union, which meets tomorrow in St. Petersburg, and is monitoring its development, Yanukovych told the same forum.

“The global economic crisis makes many countries seek various ways of protecting themselves by using existing opportunities,” he said. “We will always do everything in our national interests.’’

Brussels Meeting Delayed

EU President Herman Van Rompuy said in a statement today that a planned Oct. 20 meeting with Yanukovych in Brussels to discuss a free-trade agreement “has been postponed to a later date when the conditions will be more conducive to making progress on the bilateral relations.”

Closer ties with the EU “will depend on how progress is achieved in the near future,” the Ukrainian leader told a news conference in Donetsk later.

Russia has also been irked by the imprisonment of Tymoshenko, now in opposition, who was convicted for overstepping her authority as premier in signing a 2009 gas- supply contract with Russian Prime Minister Vladimir Putin. The Foreign Ministry said the verdict had an “anti-Russian flavor.”

Cheaper Gas

Ukraine wants to reduce the price it pays Russia for gas to unlock the next tranche of a $15.6 billion International Monetary Fund bailout without having to increase household energy prices. It may reach a new agreement with Russia soon, Yanukovych said today.

“I would like to believe that in the very near future we will dot all the i’s,” Yanukovych told a news conference in Donetsk, without elaborating. “We have paid, and will pay, for gas in a stable way.”

Ukraine wants to cut its gas imports to 27 billion cubic meters next year from an estimated 40 billion in 2011, lowering the price to $230 per cubic meter from next year’s expected average level of $415. Russia has rejected the demands, arguing that the terms of the 2009 agreement must be honored.

Both parties should fulfill their agreements “until they are terminated by some new accord,” Medvedev told the same news conference today. The two nations’ state energy companies OAO Gazprom and Natfogaz should find ways for mutually beneficial cooperation, he added.

Medvedev said relations with Ukraine are about more than just the price of natural gas, calling for closer cooperation between industries the two nations inherited from the Soviet Union. Trade between Russia and Ukraine will reach a record $50 billion this year, according to Yanukovych.

Bilateral ties “shouldn’t just boil down to which price to pay for gas,” Medvedev said. “There are other values.”

To contact the reporter on this story: Lyubov Pronina in Moscow at lpronina@bloomberg.net

To contact the editor responsible for this story: Balazs Penz at bpenz@bloomberg.net

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