Monday, May 3, 2010

Ready to Integrate: Russia Fast-tracks Merger with Ukraine

By Jiri Kominek

Russia does not appear to be wasting any time in convincing Ukraine’s new government that past differences should be put aside and instead a merger of strategic economic interests pursued, albeit at the expense of Ukraine’s national sovereignty.

The first big signal that Ukraine’s government was selling the country to the Kremlin came with the signing of the discounted gas-for-Black Sea Fleet lease extension agreement, inked on April 21.

If this move left Western leaders, diplomats and investors dizzy, then Putin’s announcement on April 26 during a meeting with his Ukrainian counterpart Mykola Azarov—in which he proposed closer cooperation on the nuclear energy front with a joint venture between Russia’s Atomenergomash and Ukraine’s Turboatom—must have caused a full-on blackout.

If this was not enough, on April 30 while meeting with Azarov in Sochi, Putin dropped the latest gem: a merger between Russia’s Gazprom and Ukraine’s debt-ridden Naftogaz.

“We spoke about integration of the nuclear sphere. We are prepared to do the same in gas. I propose to merge Gazprom and Naftogaz of Ukraine”, said Putin after the meeting.

Following Putin’s comments, a surprised Azarov ACTH claimed the issue of merging the two gas companies never entered the discussion.

“The idea expressed by the Russian Prime Minister was impromptu. So, we will discuss impromptu proposals and we will look into concrete proposals”, said Azarov on the heels of Putin’s statement.

While the Ukrainian government seemed taken aback by Putin’s “impromptu”, and immodest proposal, his spokesman meanwhile let it be known that Russia had taken more than enough time to think the deal through.

The merger idea was “thoroughly thought through” and “reflects the extent to which Russia is ready to integrate with Kyiv”, said Putin spokesman Dmitry Peskov.

Peskov’s remarks give weight to rumors seeping from the background in Kyiv that Ukrainian President Viktor Yanukovych and his government, led by Mykola Azarov, have known about and expected Russia’s accelerated efforts to integrate the key economic infrastructure of the two countries several weeks, if not months in advance.

Sources in Kyiv say the Yanukovych administration ordered a law firm to study the legal aspects and ramifications of a potential merger between Gazprom and Naftogaz several weeks ago.

Furthermore Russian media has touted the proposed merger as Kyiv’s last chance to benefit from closer economic ties with Moscow before the completion of the Nord Stream and South Stream pipelines, which will bypass Ukraine and deliver gas to E.U. markets, while its own aging pipeline infrastructure retires to the scrapheap of historical irrelevance. Source:

Yanukovych and Azarov could be playing the “dumbfounded” card and quickly implement any and all of the Kremlin’s proposals without giving Ukraine’s citizens, who are fatigued with years of political instability and economic hardship, time to react.

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