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Ukraine's likely new president has a more pro-Russian tinge, but Kiev's desperate public finances may mean that he drives just as hard a bargain on gas issues as his confrontational, Western-leaning predecessor.
Official results give Viktor Yanukovych a slim victory over his nationalist rival Yulia Tymoshenko in Sunday's runoff election. Serving President Viktor Yushchenko, who led Ukraine into two gas crises with Russia, was eliminated in the first round.
Although Yanukovych's Party of the Regions is allied to the Kremlin's United Russia party, Yanukovych has already indicated that he wants to cut Moscow's gas prices and increase the amount of Russian gas sent through his country.
Last month, Yanukovych said he would persuade Moscow to double gas transit volumes instead of building a 10 billion euro ($13.66 billion) plus pipeline under the Black Sea — South Stream. South Stream would bypass Ukraine, making its lucrative Russian gas transit redundant.
Ukraine ships some 80 percent of Russian gas exports to Europe, providing one fifth of the continent's needs, and is also heavily dependent on Russian fuel for local heating needs.
Yanukovych needs to tweak a long-term gas deal signed by Tymoshenko and Prime Minister Vladimir Putin in 2009 that made gas for Ukraine one of the most expensive in Europe and thus added pressure to Ukraine's strained finances.
Possible levers that he could use to secure concessions from Moscow include a deal for the Black Sea fleet to stay at its base in the Crimea and a guarantee that Kiev would not join the NATO military alliance.
"Outside real business, you have things such as a concession for Russia's Black Sea fleet, which expires in 2017, or Ukraine's NATO membership," said Valery Nesterov, an analyst at brokerage .
Yanukovych, who is backed by wealthy businessmen in the industrial east of the country, was Moscow's favorite candidate in the previous elections five years ago, which he lost.
Last year, Russian sympathies seemed to have switched to Tymoshenko, after she signed the deal with Putin to resume gas supplies to Europe and avoid new crises.
But last week Yanukovych still made a pledge to improve ties with Moscow after the deep chill during five years of leadership of Yushchenko.
"I am sure that we will be able to tie up a number of agreements in the near future that will be very much in the interests of Ukraine and of Russia," he said.
Vladimir Osakovsky, head of strategy at UniCredit Bank, said the arrival of a relatively pro-Russian candidate would be positive for , which could benefit from a reduction in the political component in annual talks over gas prices and European transit fees.
"However, we believe that such a narrow labeling of Yanukovych as pro-Russian is simplistic, as his political platform is pragmatic and could change substantially when faced with economic and political realities," Osakovsky added.
The realities are more than challenging.
The new president will have to reopen talks with the IMF, which agreed to an unprecedented $16.4 billion bailout as the country slipped deep into recession but suspended that program at the end of last year over broken promises.
Without the IMF money, Ukraine will find it hard to pay monthly Russian gas bills, often amounting to $1 billion.
Ukraine's role of a major European gas hub is also at risk because South Stream could almost halve its transit earnings.
Mikhail Korchemkin from the East European Gas Analysis think tank says Yanukovych's camp realizes that Gazprom, which is facing demand destruction in Europe, can barely avoid spending huge money on a new project simply to divert flows from Ukraine.
"Yanukovych is pragmatic, and he will try to solve all issues in a peaceful way. Political differences will be fading, and both sides have a good chance to reach a compromise," he said predicting that South Stream could be abandoned over time.
Russia has insisted on a role in managing Ukrainian gas pipelines, but Yanukovych has said he had no plans to overturn legislation that forbids foreigners in this sector.
"Yanukovych could offer Moscow a certain consortium that may involve the European Union and thus avoid damaging Ukraine's national pride," Nesterov said.
He added that solving a dispute over Russian oil firm 's ownership of a major Ukrainian refinery and encouraging more cross-border business deals would also help Kiev gain better gas deals in the future.
