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Ukraine to press for BSF rent increase
Journal Staff Report

KIEV, July 10 Ukraine will press for an increase in the rent it charges Russia for stationing of its Black Sea Fleet in Crimea after revising up some of the costs, President Viktor Yushchenko said.

Yushchenko, who is expected to spend five days at the summer residence of Russian President Vladimir Putin in Sochi between Aug. 15 and Aug 20, said a special commission is already working on the issue.

Of course, the cost for stationing the Black Sea Fleet will be changing because it is related to other factors that affect the final rent price, Yushchenko said in an interview with Vremia Novostei, a Russian newspaper.

Ukraine has been charging Russia about $100 million annually since 1997 for stationing about 300 battleships in Sevastopol and other bases in Crimea, according to a 20-year lease agreement signed in 1996.

However, Ukraine has first mentioned the possibility of increasing the rent in 2005, several months after Yushchenko was sworn in as president.

Ukrainian officials have mentioned different figures, ranging from $500 million to $1.4 billion, to charge Russia for the stationing.

But Russia has vigorously defended the agreement signed in 1996 and any changes to the agreement would provoke serious confrontation with Moscow.

Yushchenko said it was too early to mention the final rent price, but suggested that he expected to make progress on the issue next year. The task for the special commission is to start negotiations and to come up with a road map for the next year. This is a delicate issue, but we have to solve it, he said.

Ukraine has been apparently considering the rent hike in retaliation for Russias dramatically increasing prices of natural gas it supplies to Ukraine. Russia increased gas prices to $130 per 1,000 cubic meters in 2007 from $95/1,000 cu m in 2006 and $50/1,000 cu m in 2005.

Yushchenkos comments bring up the issue ahead of important talks with Russia over natural gas prices that Russia plans to charge in 2008.

Analysts said that Russia may seek to charge Ukraine $230/1,000 cu m for gas in 2008, a price that may make most of Ukrainian steel companies and mineral fertilizer producers unprofitable.

Russian Prime Minister Mikhail Fradkov said earlier this year that gas price talk will be held in November, not in August as had been suggested by Ukraine.

Analysts said the fact that Russia wants to hold the talks in November, after the Sept. 30 snap election in Ukraine, suggests that it may be trying to see whether Prime Minister Viktor Yanukovych, a pro-Russian politician, keeps the job after the vote.

Meanwhile, as Yushchenko says Ukraine will press with increasing the rent costs, analysts said Kiev will try to pinpoint the properties that were not included in the agreement but that have been used by Russia for a decade due to lack of control from Ukraine.

The Russian party today is using [some] real estate and land plots in Sevastopol for free, said Boris Tarasiuk, a former Ukrainian foreign affairs minister. (tl/ez)

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USD 26.23 26.23
RUR 0.421 0.422
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