The 17 December 2013 Russian–Ukrainian action plan was a de facto defunctUkraine crisis: Russia halts gas supplies to Kiev, BBC News (16 June 2014) proposed agreement between the Russian president Vladimir Putin and former Ukrainian president Viktor Yanukovych publicized on 17 December 2013 whereby Russia would buy $15 billion of Ukrainian eurobonds to be issued by Ukraine and that the cost of Russian natural gas supplied to Ukraine would be lowered to $268 per 1,000 cubic metres (the price was more than $400 at the time).Russia cuts Ukraine gas price by a third, BBC News (17 December 2013) The treaty was signed amid the escalating Euromaidan movement which sought closer ties between Ukraine and the European Union.Ukraine police dismantle Kiev protest camps, BBC News (9 December 2013) The interest rate on the loan would be renegotiated every three months, based on a verbal agreement between the two leaders.Putin's meddling in Ukraine sinister - Winnipeg Free Press
The proposed agreement is de facto defunct since Russia has halted its purchase of the never issued eurobonds since the ousting of President Yanukovich of 22 February 2014 and in April 2014, the Russian natural gas discount was cancelled.
Since December 2015, Ukraine has defaulted on the $3 billion debt payment to Russia that was part of the action plan. Yahoo News. Published 18 December 2015. Retrieved 2 February 2016., AP News (18 December 2015)
Background
In mid-August 2013, Russia changed its customs regulations on imports from Ukraine. Ukrainian Industrial Policy Minister Mykhailo Korolenko stated on 18 December 2013 that because of this Ukraine's exported had dropped by $1.4 billion (or a 10% year-on-year decrease through the first 10 months of the year). The State Statistics Service of Ukraine reported in November 2013 that in comparison with the same months of 2012 industrial production in Ukraine in October 2013 had fallen by 4.9 percent, in September 2013 by 5.6 percent and in August 2013 by 5.4 percent (and that the industrial production in Ukraine in 2012 total had fallen by 1.8 percent).Decline in industrial production in Ukraine in October 2013 slows to 4.9 percent, Kyiv Post (18 November 2013) In June 2010 (a few months after the 2010 Ukrainian–Russian Naval Base for Natural Gas treatyRussia, Ukraine agree on naval-base-for-gas deal, CNN (21 April 2010) ), Ukraine paid Gazprom (the Russian government controls 50.002% of shares in Gazprom) around $234 per 1,000 cubic metres of natural gas.UPDATE 2-Russia threatens to cut Belarus gas supplies Monday, Reuters (18 June 2010) In January 2013, Ukraine paid $430 per 1,000 cubic metres.Ukraine set to sign landmark $10 billion shale gas deal with Shell, Reuters (24 January 2013)Shell for shale: Ukraine signs major deal , Euronews (25 January 2013)UPDATE 1-Ukraine signs landmark $10 bln shale gas deal with Shell, Reuters (24 January 2013) And at the time of the 17 December 2013 agreement, Ukraine still paid more than $400. Since August 2011, Ukraine seeks to reduce imports of Russian natural gas by two-thirds (compared with 2010) by 2016.Ukraine seeks to cut imports of Russian gas, Kyiv Post (30 August 2011) Natural gas is Ukraine's biggest import at present and is the main cause of the country's structural trade deficit.Kyiv's gas strategy: closer cooperation with Gazprom or a genuine diversification, Centre for Eastern Studies (15 July 2013)
Whatever the reason might have been; the economy of Ukraine was approaching a bad state by late 2013.Fitch: Ukraine protests increase pressure on credit profile, Interfax-Ukraine (16 December 2013) https://www.bbc.co.uk/news/business-25430980 Russian bailout masks Ukraine's economic mess, BBC News (18 December 2013) and had poor solvency.Protests in Ukraine up risk of growth in foreign currency demand, says Moody's, Interfax-Ukraine (4 December 2013)
On 21 November 2013, a Ukrainian government decree preparations for signing an Association Agreement and Deep and Comprehensive Free Trade Agreement with the European Union (EU).Ukrainian government issues decree to suspend preparations for signing of association agreement with EU, Interfax-Ukraine (21 November 2013)Rada votes down all bills on allowing Tymoshenko's medical treatment abroad, Interfax-Ukraine (21 November 2013)Cox-Kwasniewski mission to continue until Eastern Partnership Summit, Interfax-Ukraine (21 November 2013) Despite that in the months before Ukrainian president Viktor Yanukovych had urged the parliament to adopt laws so that Ukraine would meet the EU's criteria.EU Commissioner Fule expects Rada to pass European integration bills on November 21, Interfax-Ukraine (20 November 2013) Ukrainian president asks for laws to be passed to facilitate EU association agreement , Euronews (3 September 2013)Ukraine leader urges pro-Europe drive despite Kremlin pressure, Reuters (3 September 2013) On 25 September 2013 Chairman of the Verkhovna Rada (Parliament of Ukraine) Volodymyr Rybak stated that he was sure that his parliament would pass all the laws needed to fit the EU criteria for the Association Agreement since, except for the Communist Party of Ukraine, "The Verkhovna Rada has united around these bills".EU-Ukraine Association Agreement to be signed, Ukraine to go to Europe – speaker, Interfax-Ukraine (25 September 2013)
The reason given for the (stop preparations for signing EU-agreement) decree was that the previous months Ukraine had experienced "a drop in industrial production and our relations with CIS countries". The government also assured "Ukraine will resume preparing the agreement when the drop in industrial production and our relations with CIS countries are compensated by the European market".Ukraine to resume preparing agreement with EU when compensation for production drop found – Boiko, Interfax-Ukraine (21 November 2013) During two years of negotiations, Ukraine did not raise the issue of large, unconditional grants from the EU and IMF until the eve of the Vilnius summit. According to Ukrainian prime minister Mykola Azarov "the extremely harsh conditions" of an IMF loan (presented by the IMF on 20 November 2013), which included big budget cuts and a 40% increase in gas bills, had been the last argument in favor of the Ukrainian government's decision to suspend preparations for signing the Association Agreement. On 7 December 2013 the IMF clarified that it was not insisting on a single-stage increase in natural gas tariffs in Ukraine by 40%, but recommended that they be gradually raised to an economically justified level while compensating the poorest segments of the population for the losses from such an increase by strengthening targeted social assistance.MF not insisting on single-stage increase in tariffs, says resident representative in Ukraine, Interfax-Ukraine (7 December 2013) The same day IMF Resident Representative in Ukraine Jerome Vacher stated that this particular IMF loan is worth US$4 billion and that it would be linked with "policy, which would remove disproportions and stimulated growth".IMF links loan amount to Ukraine with reforms, Ukrinform (7 December 2013)
The decision to put off signing the EU Association Agreement led to massive, ongoing protests in Ukraine (for closer ties between Ukraine and the EU) that began in the night of 21 November 2013 when up to 2,000 protesters gathered at Kyiv's Maidan Nezalezhnosti. Противники приостановки евроинтеграции Украины в ночи вышли на улицы Киева Opponents of suspension Ukraine's European integration in the night took to the streets of Kiev, NEWSru (22 November 2013) Post by Arseniy Yatsenyuk, Twitter (21 November 2013) УВАГА! Збір сьогодні на Майдані Незалежності о 22:30 !!! Watch out! Gather today at Maidan Nezalezhnosti at 22:30!!, Korrespondent.net (21 November 2013) And that had risen to 400,000–800,000 protesters demonstrating in Kyiv on the weekends of 1 December and 8 December 2013.
Negotiation
Russian president Vladimir Putin and his Ukrainian counterpart Viktor Yanukovych held the sixth "interstate consultation" on 17 December in Moscow.Putin expects to make progress on sensitive bilateral issues during meeting with Yanukovych, Interfax-Ukraine (17 December 2013) Yanukovych flew to Moscow on the private jet airliner of Ukrainian oligarch (and alleged financier and chieftain of Yanukovych's Party of Regions) Rinat Akhmetov.Ukraine's Yanukovich returns from Moscow on Akhmetov's plane – and on a tight leash – beyondbrics - Blogs - FT.com After the meeting, Yanukovych stated "We've prepared a joint action plan to resolve trade and economic restrictions, a so-called road map that will significantly improve performance in this area" and added this would benefit the entire sectors of the economies of the two countries.Action plan for settlement of trade restrictions to deepen Ukrainian-Russian strategic relations, says Yanukovych, Interfax-Ukraine (17 December 2013) "Favourable conditions for the about 1.5 million people from Ukraine that are working in Russia" were also discussed.Putin calls for creation of favorable conditions for Ukrainian citizens working in Russia, Interfax-Ukraine (17 December 2013) According to President Putin and Russian presidential press secretary Dmitry Peskov this deal was "not tied to any conditions" and Ukraine's possible accession to the Customs Union of Belarus, Kazakhstan, and Russia was not addressed.Russia and Ukraine strike $15bln deal, Al Jazeera (17 December 2013) Peskov also added "it is our principled position not to interfere in Ukraine's affairs" and accused other countries of doing the opposite.Putin's spokesman: Ukraine's accession to Customs Union was not discussed at Tuesday meeting, Interfax-Ukraine (17 December 2013) According to President Yanukovych, the trade situation between Russia and Ukraine required urgent intervention, and that it should be coordinated with other Commonwealth of Independent States (CIS) countries.Situation in trade between Russia and Ukraine requires urgent intervention - Yanukovych, Interfax-Ukraine (17 December 2013) He also added referring to Russia–Ukraine relations, "We'll have to learn lessons for the future and not to repeat such mistakes".Yanukovych: Kyiv, Moscow shouldn't replay past mistakes, Interfax-Ukraine (17 December 2013) And President Yanukovych also stated that Ukraine and Russia should strengthen cross-border and inter-regional cooperation "which create convenient conditions for the people".Ukraine, Russia should develop cross-border and inter-regional cooperation - Yanukovych, Interfax-Ukraine (17 December 2013)
The next day Prime Minister Mykola Azarov stated that without the deal with Russia "bankruptcy and social collapse would have awaited Ukraine". He also added that there was no way Ukraine could have signed the EU Association Agreement as Ukraine would have had to accept unfeasibly stringent IMF conditions for economic reform. The protest on Maidan Nezalezhnosti continued on 18 December 2013.Anti government protesters in Kyiv reject Ukrainian-Russian pact, Euronews (18 December 2013) He also stated "Nothing is threatening stability of the financial-economic situation in Ukraine now. Not a single economic factor".Nothing threatening Ukraine's economic, financial stability now - PM Azarov, Interfax-Ukraine (18 December 2013)
On 19 December 2013, Russian President Putin stated about the (which he described as an "act of brotherly love") 17 December deal between Russia and Ukraine "This is not at all linked to (protests at) Maidan, nor with the EU-talks that Ukraine leads... We're just seeing that Ukraine is in dire straits and we should support her".Ukraine and nuclear missiles dominate Putin's annual press address, Euronews (19 December 2013)