Title: The Ukraine-Russia deal | VOX, CEPR Policy Portal
Headings: The Ukraine-Russia deal
The Ukraine-Russia deal
Content: The new deal now includes Russia’s agreement to sell oil and gas to Ukraine at significantly below market prices. This provides great immediate relief to the cash-strapped Ukrainian government, of course. It also creates a deep political dependence on the Ukrainian authorities vis à vis Russia. The costs of the deal are for Russia, whose government will have to compensate its oil and gas exporters. This may be possible at a time when the oil and gas markets are rather depressed. Eventually, however, global demand will rise again, pushing up prices and increasing the costs for Russia. Here again, it is hard to imagine that Russia will be willing to continue indefinitely to heavily discount its oil and gas exports to Ukraine. Eventually it will pull the plug, after having suffered losses. When that happens, Ukraine will be in deep crisis. a
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