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Russian President Vladimir Putin announced this at a meeting with his Ukrainian counterpart Viktor Yanukovich in Moscow.
“I want to draw your attention to the fact that this is not tied to any conditions … I want to calm you down – we have not discussed the issue of Ukraine’s accession to the customs union at all today,” Putin clarified.
“There can be no doubt that Ukraine is our strategic partner and ally in the fullest sense of the word,” Putin told the visiting President.
Russia will also sell gas to Ukraine’s Naftogaz energy company for $268.5 per 1,000 cubic meters, well below the current level of more than $400. Putin, however, did put in a rider saying the price may only be lowered temporarily.
The new price will take effect at the start of next month, Ukraine’s energy minister said.
Russia will dip into its national wealth fund to buy the $15 billion in Ukrainian eurobonds, Putin said.
Ukraine is struggling with a financial crisis and with a balance of payments deficit and unpaid gas bills from Russia.
The two Presidents also chaired a meet of the Russian-Ukrainian Interstate Commission on Tuesday.
The two sides also signed a series of agreements on resuming mass production of the An-124 aircraft, building a transporter bridge across the Kerch Strait, cooperation in shipbuilding and the aerospace industry, and combatting drug trafficking.
Putin pointed out to his Ukrainian counterpart that firm action was needed to restore the graph of a falling bilateral trade that had dropped by 14.5 per cent over the past two years.
In November the Ukrainian government backtracked from an association deal with the EU saying it would harm economic relations with Russia, prompting mass demonstrations by pro-EU protesters and throwing the country into a political crisis.
The EU on Sunday suspended negotiations over the integration pact.
Both the EU and Moscow have accused the other of using strong-arm tactics to secure economic ties with Kiev.