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. Last Updated: 07/27/2016

Putin: Ukraine Deals "Anything But Simple"

Prime Minister Vladimir Putin on Thursday described the decision to sign the latest $40 billion gas and naval deals with Ukraine as a pricey attempt to lay the groundwork for other joint economic and political plans.

Ukrainian President Viktor Yanukovych had agreed the previous day to extend the lease of the Sevastopol naval base for Russia's Black Sea Fleet by 25 years to 2042. President Dmitry Medvedev promised to rescind the export duty on most of the gas that Ukraine imports, giving the country an effective 30 percent discount.

"It's anything but a simple decision for us. Anything but simple, because it is expensive,” Putin said in opening a Cabinet session.

Ukraine will deduct the money that it saves on gas from the new, higher bill that Russia will have to pay to lease the Sevastopol base. Kiev will raise the rental price after the current lease agreement expires in 2017, Putin said.

The increased lease payment will amount to $1.2 billion per year, Yanukovych said in Kiev on Thursday.

Putin said Russia will continue to pay the current rate, $98 million each year, until 2017 by subtracting the amount from Ukraine's outstanding gas bills for the early 1990s, which were valued at $1.1 billion as of January. Afterward, Russia will pay in cash, raising the annual transfers “somewhat” for the next 25 years.

This way, Russia's payments for the naval base could well come close to $40 billion by the end of the lease in 2042.

Putin justified the agreements — reached after a five-year estrangement between the neighboring countries during the rule of Viktor Yushchenko, Ukraine's previous president and a stalwart advocate of joining NATO — as being worth something more than money.

"I will stress that this means a qualitative breakthrough in bilateral relations. And money is not the key point here at all,” he said. “The key thing is ultimately … the relationship of trust, the understanding of common interests and historical goals and the feeling of fellowship.”

The achievement, Putin said, is bound to spur future cooperation.

Putin portrayed the country's Black Sea Fleet, used in the short 2008 war with Georgia, as a force for maintaining peace and security regionally and globally. Its warships are contributing to the international crackdown on piracy in the Gulf of Aden off of Somalia and have joined the NATO-led counterterrorism exercises in the Mediterranean Sea, he pointed out.

Russia doesn't need to rent naval bases in any of its other gas-trade customer nations, so they shouldn't bother offering deals similar to Ukraine's, Putin said, in what appeared to be a joke.

Energy Minister Sergei Shmatko indicated Thursday that Ukraine's proposal to resurrect the international consortium, including Gazprom, to maintain and operate the country's pipelines wasn't dead. The economic panel of the Russian-Ukraine intergovernmental commission for cooperation will work on a more detailed plan for the project, he said.