Ukraine will also suggest that Russia should be ready to relocate its Black Sea Fleet from the Ukrainian ports completely after the 20-year rent agreement expires in 2017, he said.
“We stress that we should shift towards market oriented relations not only in natural gas sector, but in all other sectors too, including the Black Sea Fleet,” Tarasiuk said.
Grigory Karasin, Russia’s deputy foreign minister, is expected to lead a Russian team for talks on the issue in Kiev. Volodymyr Ohryzko, Ukraine’s first deputy foreign minister, will the lead the Ukrainian team.
These are the first talks on the BSF since Russia and Ukraine have signed the rent agreement in 1996.
Under the agreement, Russia is supposed to pay $97 million to Ukraine annually through 2017 for the right to station about 300 battle ships in Sevastopol and other ports. The money, however, doesn’t change hands as the payments go directly to redeem Ukraine’s natural gas debt incurred in early 1990s.
Ukraine said recently Russia had been using more properties and facilities that had been actually covered by the agreement, and suggested a fair rent payment should be at $1.8 billion annually.
Ukraine’s accelerated pressure to hike the rent payment comes less than two months after Ukraine has been forced to accept a 90% hike in natural gas prices demanded by Russia.
It shows that Ukraine has been seeking to partially recoup the increased gas prices. It also comes as a response to Russian President Vladimir Putin’s recent laments that Russia has been subsidizing Ukraine to the tune of $3.5 billion annually through cheap natural gas.
But Russia, which heavily pushed for market prices for natural gas, had so far rejected Ukraine’s demands for boosting the rent payments to levels reflecting real estate markets.
Meanwhile, the pressure on Moscow to increase the rent payment will probably not be the only bad news for Russia. Ukraine will also stress the fleet must be relocated completely in 2017.
“We call on Russia to begin consistent and systemic work to gradually relocate [the navy] from our territory to the Russian Federation,” Tarasiuk said.
The demand for the relocation means that Russia will have to cough up billions of U.S. dollars to immediately start construction of a major naval base in one of its own Black Sea ports.
Analysts said that building the base similar to Sevastopol, the biggest and the best equipped Black Sea naval base in the former Soviet Union, may require about $5 billion and at least 10 years.
Russia has never yet started building the new base, which has been interpreted by military analysts in Ukraine as reluctance to relocate the naval ships after 2017.
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