For the past several days Russia has been in intense negotiations with Ukraine over their trade in natural gas. The Russian state-owned giant Gazprom sells gas to Ukraine for prices much lower than international market rates. Putin said that the Russian Federation budget is losing 4.6 billion U.S. dollars a year by undercharging Ukraine. After stating this financial fact, Putin appeared angry when he said that "Ukraine is absolutely capable of paying the market rates for Russian natural gas."
Ukraine spent one night thinking over Putin's remarks and came up with some surprising announcements during their regular Friday presidential press-conference. Anatoly Matvienko, assistant to the chief of staff of the Ukrainian president, started out by saying abstractly "if we are heading towards market prices, we should think about charging the international market rates for hosting foreign troops".
After some more remarks, Ukrainian officials got to the point and said that Russia is also underpaying, for leasing the Russian Navy base in Sevastopol. Russia pays an annual fee of $93 million, plus other expenses for maintaining the city's infrastructure. The Ukrainian government now insists that Russia's actual payments should be at least $120 million dollars a year. In comparison, Russia is paying Kazakhstan $200 million a year for the Baikonur Cosmodrome (Russian space launch facility based in Kazakhstan).
However, everything isn't that simple. Russian gas is produced by a corporation (Gazprom) and is a product that has a market price. The Russian Navy's status in Sevastopol (originally a Russian city) is a gray area. There are no reference points for setting the market price for hosting foreign military bases. For example, the U.S. paid $23 million a year to Uzbekistan for using its air force base. The U.S. pays $1 million a year in rent to Cuba for the American naval base at Guantanamo Bay. Russian officials responded to the Ukrainian complaint with sarcasm, laughing into the cameras: "is Ukraine talking about 'per square meter' rent, and if they are, should it be compared to downtown Paris or Tahiti?"
Crimea was ceded by the Russian SFSR to the the Ukrainian SSR in 1954 to celebrate the three hundredth anniversary of the unification of Ukraine with Russia. Although Crimea has been Russocentric before and after 1954 (and it remains such), it has been technically a part of Ukraine since 1954.
Another issue is that Russian-Ukrainian contract is a "package deal", and it is legally impossible to renegotiate just one thing at a time. The contract goes over the borders (Ukraine enjoyed some advantages in negotiating with Russia after 1991 for redrawing the lines), economic cooperation, etc. Best of all for the Kremlin, the Russian Navy's rates are locked in until 2017.
Even considering the possibility of Russia buying the rights to the Ukrainian port or increasing the rent payments, $93 million still is nothing compared to $4.6 billion, so why shouldn't Ukraine pay the market prices? Doesn't the promotion of democracy include accepting free markets? Isn't the new democratic government of Ukraine contradicting its own stated objectives by openly refusing to pay an honest rate for Russian energy?