EU, Ukraine sign association pact

The European Union and Ukraine signed the core elements of a political association agreement on Friday, committing to the same deal that then-Ukranian president Viktor Yanukovich rejected in November.

On the same day, Russian President Vladimir Putin signed legislation that completed the process of absorbing Crimea into Russia, defying Western leaders who say the Black Sea peninsula remains part of Ukraine.

In a Kremlin ceremony shown live on state television, Putin signed a law ratifying a treaty making Crimea part of Russia as well as legislation creating two new Russian administrative districts: Crimea and the port city of Sevastopol.

In Brussels, Ukrainian Prime Minister Arseny Yatseniuk, EU leaders Herman Van Rompuy and Jose Manuel Barroso and the leaders of the bloc's 28 nations signed the core chapters of the Association Agreement on the sidelines of an EU summit.

The deal commits Ukraine and the EU to closer political and economic cooperation, although more substantial parts of the agreement concerning free trade will be signed only after Ukraine holds presidential elections in May.

Van Rompuy, the European Council president, said the agreement will bring Ukraine and its 46 million people closer to the heart of Europe and a "European way of life".

"(This) recognizes the aspirations of the people of Ukraine to live in a country governed by values, by democracy and the rule of law, where all citizens have a stake in national prosperity," he said.

Two sets of the documents were passed around the table for the EU's leaders and Yatseniuk to sign.

Van Rompuy and Yatseniuk then shook hands and exchanged the documents to applause, witnesses said.

As well as the closer political ties, the European Commission has agreed to extend nearly 500 million euros ($690 million) in trade benefits to Ukraine, removing customs duties on a wide range of agricultural goods, textiles and other imports.

Once Ukraine has held presidential elections on May 25 and a new administration is in place, the EU plans to move ahead with signing a free trade agreement with Ukraine, giving the country unfettered access to the EU's market of 500 million consumers.

That has far more potential to strengthen Ukraine's shattered economy, but also runs the risk of provoking retaliatory steps from Russia, which has already imposed stricter customs checks on trade with Ukraine.

Oil, gas become issue

Meanwhile, many EU nations are heavily dependent on Russian oil and gas, and the EU is divided on how far it can go in cutting economic ties with one of its largest trading partners and a key energy supplier.

EU efforts to diversify energy supplies after Russia cut deliveries to Ukraine in 2006 and 2009 have so far failed to make much headway.

Russia fired another warning shot on this front on Friday.

The Kommersant business daily said that when Moscow and Kiev revise their agreement on the Crimea base for the Black Sea fleet, Ukraine could lose the lower price it got in return for the 2010 accord.

If Kiev loses its $100 discount, it will end up paying up to $480 per 1,000 cubic meters for natural gas, the highest price of any of gas giant Gazprom's clients in Europe, the newspaper said.

A gas price hike of this order would be a huge blow for Ukraine and likely add to tensions.

(China Daily 03/22/2014 page8)