December 11th, 2013
01:43 PM GMT
Geographically, Ukraine straddles Eastern and Western Europe, but the President Viktor Yanukovych is finding it increasingly difficult to balance the country’s interests.
Yanukovych came into power touting his close relations with Moscow and he maintains when it comes to energy supplies they are essential for Ukraine and Europe as well.
"I think Europe will sleep peacefully in warmth if Ukraine has good relations with Russia, if there are no such conflicts like when we were shut off from gas,” he said on Ukrainian television. “This is unacceptable, so we need to protect our own interests," said Yanukovych.
Ukraine still gets 60 percent of its gas from Russia, but the level of dependence wanes the further one gets away from the Eastern and Central European neighbourhood.
Bulgaria gets all of its natural gas supplies from Gazprom, the Russian state energy giant; the Czech Republic 80%. Germany remains a big customer, but at just below 40%, dependency on Russian gas is much less compared to when supplies were cut off in 2006 and 2009.
What is important to watch are the signals sent from Moscow in terms of both direct funding to Ukraine and potentially re-working the 2009 gas agreement.
This is Ukraine’s third recession since 2008 and foreign reserves have dropped to their lowest level since 2006. A successful agreement from Moscow, according to Laurent Ruseckas of IHS CERA, would be obtaining up to $10 billion and a cut rate deal on gas prices.
This would allow the Ukrainian President to tell those still protesting on the freezing cold streets of Kiev that he can obtain some political payback for not signing on to the association agreement with the European Union.
While he deals with this crisis he knows full well that decisions this week will likely impact any hopes he has for re-election in 2015.
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