KIEV, April 7 – Russia suggested on Thursday that Ukraine could save up to $8 billion annually by rejecting a free trade agreement with the European Union and joining a Moscow-led economic alliance instead.

The offer, disclosed by a senior official at Russian gas giant Gazprom at a conference in Moscow, comes days before Russian Prime Minister Vladimir Putin is due to visit Kiev for talks.

"The difference in price is that Ukraine currently gets gas at [a] European price,” Gazprom's deputy CEO Valery Golubev said at the conference. “But the price would be [at Russian domestic levels], which is significantly lower.”

The developments come as Russia has stepped up diplomatic activity towards dissuading Kiev against establishing the free trade with the EU and against signing a political association agreement by the year-end.

Instead, Moscow has been suggesting Kiev to join the Customs Union, a trade and political bloc that includes Russia, Belarus and Kazakhstan. Putin is expected to discuss the issue during his April 12 visit to Ukraine.

“This is a serious offer from the Russians, who seem desperate to lock Ukraine in and make sure it does not sign the free-trade agreement with the EU,” said Timothy Ash, global head of emerging markets research at the Royal Bank of Scotland in London. “Ukraine as ever is swinging both ways, trying to milk both cows.”

President Viktor Yanukovych, in an address to Parliament on Thursday, said that Ukraine will pursue its pro-European course seeking to sign the free trade and political association agreements by the end of the year.

Yanukovych said the cooperation with Russia will also increase, but insisted that Ukraine should have a special status.

"I believe that further development of relations with the Customs Union will rely on [a] new contractual framework for free trade agreements and possibly a cooperation agreement with the formula '3 +1'," Yanukovych said.

Ukraine is keen to sign free-trade deals both with Europe and Russia. But Moscow is pushing hard for Kiev to also join the Customs Union, which would be incompatible with an EU free-trade agreement.

“We count on our partners, especially in the EU, will most carefully treat the priorities that had been outlined by the president of Ukraine,” Oleh Voloshyn, a spokesman for the Ukrainian Foreign Ministry, said. “This will put a period in discussions over the past several days with concerns that Ukraie may be deviating from the European course.”

Voloshyn said Ukraine will seek to improve cooperation wit Russian and other countries in a way that does not exclude greater political and economic ties with the EU. (tl/ez)