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. Last Updated: 07/27/2016

Moscow, Kiev Sign New Economy Deal

The prime ministers of Russia and Ukraine, Viktor Chernomyrdin and Leonid Kuchma, have bolstered a major fence-mending drive in troubled relations between the two countries, signing accords on economic cooperation between border regions, according to Russian television.

At a meeting in the southern Ukrainian city of Kharkov, the two men - both of whom have backgrounds in Soviet industry - signed agreements Monday evening that set up a free customs zone, liberalized banking regulations and created free movement of labor in five regions on each side of the border, Reuters reported.

"We became new states but when we did so, we didn't understand the outcome", Chernomyrdin told the meeting. "Now is the time to turn back to closer economic cooperation".

A front page story in the newspaper Izvestia on Tuesday said the two men were also close to signing a deal on the vexed issue of Ukraine's 176 strategic nuclear weapons. According to the article, the deal would allow Russian personnel to service the weapons at two Ukrainian bases and states that the weapons would later be dismantled.

The nuclear issue has proved one of the thorniest in relations between the two most populous former Soviet republics and any agreement would represent a dramatic breakthrough. However, a Chernomyrdin aide said Tuesday that the Izvestia article was premature.

Ukrainian officials were quick to insist that the new economic agreement did not signify economic union with Russia.

"No, we are not talking about an economic union between the two countries", said Valentyn Landyk, the deputy prime minister for foreign trade. "But Russia is now a priority".

The thaw in relations appears to have been precipitated by strikes in the Russified Donbass mining region earlier in the month, in which miners forced the government in Kiev to call a referendum on confidence in both President Leonid Kravchuk and parliament.

The miners demanded not only higher pay, but also greater political autonomy, alarming Kiev with the threat that the newly independent state could be torn apart between the Russified east and fiercely independent west.

"I want one Ukraine with east and west living in peace. That's why my line is in the center", Kravchuk told Crimean television.

Monday's agreement acceded to a regional demand that Kiev restore economic ties across the border that were disrupted when the former Soviet Union collapsed. The initial loss of ties through economic and administrative chaos has since been compounded. Ukraine has shifted to its own currency, the karbovanets, complicating banking transactions between the two countries, which have also been in constant dispute over debt payments.

While the nuclear deal is likely to face a rough ride in the two parliaments, the economic accords could find greater support, as industrial lobbies on both sides of the border have been clamoring for increased cooperation.