In the last two to three days Russia has been turning up the heat on Ukraine. This appears to be an attempt to reign in Ukraine following that country’s Orange Revolution, which resulted in the election of President Viktor Yuschenko. Yuschenko was openly opposed by the Kremlin who saw in him someone who might potentially threaten previous privatization deals. Many of these deals placed Ukrainian wealth in the hands of Russian businessmen or those with close connections with Russian business interests. Concerns have been voiced throughout post-communist Europe, and in particular the region of the former Soviet Union, that Moscow is using Russian business ownership of major enterprises as a means to influence the domestic and foreign policy of neighboring countries.
Since Yuschenko’s election, Ukraine’s government has actively pursued undoing the results of previous sales of state enterprises. Thus far twenty-two such privatization deals have been placed in abeyance. In response, Russia's National Reserve Bank announced this week that it is suspending investment in Ukraine owing to concerns over the investment climate related to past privatization deals. The day before, Russia’s state-owned natural gas monopoly, Gazprom, demanded $1.25 billion compensation for 7.8 billion cubic meters of gas stored in Ukraine that allegedly disappeared during the Orange Revolution. Gazprom also announced that it was seeking to increase the price of gas sold to Ukraine from $50 per 1,000 cubic meters to $160 next year.
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