MOSCOW, December 17. /TASS/. Russian President Vladimir Putin forecasts worsening of economic relations with Ukraine next year.

"Regrettably, we predict a worsening of economic relations with Ukraine as of January 1. We will have to make a decision we will no longer be doing business with Ukraine as a member of the CIS free trade zone," Putin told the year-end news conference on Thursday.

According to the president, Russia is not going to impose any sanctions against Ukraine, but as the free trade zone agreement with Ukraine is terminated, Ukraine will not have benefits or preferences.

"Russia is not imposing whatever sanctions," he said adding Ukraine would not be under conditions worse than Russia’s other foreign counterparts.

"However, Ukraine will not be enjoying any benefits or preferences," the president said.

This would mean, he said, while now Russia and Ukraine use zero rates in trade, from January 1, they will apply the "average tariff of 6%." "In some cases it would be 3%, in others 8%, or even 10%."

"This is not our choice," Putin said. "Our efforts were not allow this, but they would not hear us."

"We shall be working under the conditions we shall have," he said.

Earlier on Thursday, the Russian president presented to the State Duma a bill on termination of the free trade zone agreement with Ukraine, and on Wednesday he signed an order on termination of the agreement from January 1 "due to the special conditions, affecting the interests and economic security of the Russian Federation, and which require urgent measures." The president’s press secretary Dmitry Peskov explained the reason for the decision was that from January 1 of the coming year will come into force the trade-economic part of the association agreement between Ukraine and the EU.

Russia’s Minister of Economic Development Alexey Ulukayev said despite the presidential order, trilateral talks Russia-Ukraine-EU would continue and "the door is not shut yet." The trilateral meeting may be due in Brussels on December 21.

Russia not interested in escalation of conflict in Ukraine’s south-east

In Vladimir Putin's words, Russia is not interested in the escalation of conflict but it cannot be solved by eliminating people in Ukraine’s south-east.

"I sincerely say to you that we are not interested in the escalation of the conflict," Putin stressed. "On the contrary, we are interested in resolving this conflict as soon as possible but not by means of physically eliminating people in Ukraine’s south-east," he told the annual news conference.

Putin called for considering the results of municipal election in Ukraine’s south-east. "In nine or ten regions there [in Ukraine’s south-east], the opposition bloc took the first or second place," he noted. "Do Kiev authorities not see it? Do they not want to consider attitudes and expectations of their own people?," he asked stressing that he hope Moscow and Kiev will hold "an open and honest dialogue."

Local election is envisaged by the Minsk accords signed on February 12, after negotiations in the so-called "Normandy format" in the Belarusian capital Minsk, bringing together Russian President Vladimir Putin, French President Francois Hollande, German Chancellor Angela Merkel and Ukrainian President Petro Poroshenko.

The Minsk accords also envisage ceasefire, weaponry withdrawal, prisoner exchange, local election in Donbass, constitutional reform in Ukraine, and establishing working sub-groups on political, economic, security and humanitarian components of the Minsk Agreements.

The Ukrainian forces and the self-defense forces of the self-proclaimed Donetsk and Luhansk republics have repeatedly accused each other of violating ceasefire and other points of the Minsk agreements.

Putin is not sure it is reasonable to stop gas transit through Ukraine

Russian President Vladimir Putin said he is not sure it is appropriate to terminate gas transit through Ukraine.

"I'm not sure that this should be done, that it is necessary to Ukrainian transit [of gas — TASS]," Putin said.

"As for comparing capabilities of Ukrainian transit with the transit through the Nord Stream-2-still it is required that Nord Stream in general and Nord Stream-2 should meet certain requirements in the future," the president said. He added that such requirements include reliability, market-oriented operation, legal and administrative regulation to the highest standards.

"Are our Ukrainian partners able to do what we can do with our European partners on the Nord Stream? If they are — we will continue to work with them, if they are not capable — then we'll see what to do about it," Putin said.

The contract with Ukraine on gas transit expires on January 1, 2020. Earlier, Prime Minister Dmitry Medvedev said that Russia will not renew the contract with Ukraine for the transit of gas on conditions which are unfavorable for Russia.

Meanwhile, the head of Gazprom Alexey Miller suggested that Russia should completely abandon transit of gas through Ukraine. Energy Ministry Alexander Novak voiced the same proposal.

Exchange of detained in Donbas should be on all-for-all basis

Russian President Vladimir Putin has said that the exchange of prisoners in the Donbas region should be based on the "all-for-all" principle, Russia supports the stance of Donetsk and Luhansk in this issue.

He admitted that there were people in Donbas "dealing with resolving issues in a particular sphere there." "But that does not mean that Russian troops are present there. Feel the difference," the Russian president said.

Addressing a Ukrainian reporter, Putin noted, "You mentioned two or three persons whom you want to exchange and then came up with a long list of those whom you want to exchange them for." To begin with, the exchange should be equal. We need to discuss everything quietly with our colleagues, to talk and push ahead with efforts on which we have always insisted and what the Ukrainian president proposes — it is necessary to release people held in custody by both sides. This concerns, above all, people in the Donbas region, in south-eastern Ukraine and Ukrainian military service members detained in these areas. But the exchange must be equal," he said.

"It is no secret that the Ukrainian authorities consider those who were detained in Donbas to be people who should be exchanged, while those held in prisons in Ukraine, in Kiev, are seen as criminals who are beyond this exchange. This is something people in Donbas disagree with. We need to be honest and say," Let’s exchange all for all, as suggested by Pyotr Poroshenko, and not selectively," the Russian president said. According to him, "this is an approach we support." "We have a lot of disagreements with the Ukrainian authorities, but here we share a common stand," Putin noted.

Putin calls Kiev’s actions concerning implementation of Minsk accords manipulations

Russian President Vladimir Putin has described Kiev’s actions with regard to the implementation of the Minsk agreements as manipulations.

"These are manipulations," he said at his annual news conference describing the official Kiev’s actions. "If we really want to solve the problem, let’s stop doing that, let’s work together on that."

Putin noted that Moscow was ready to persuade people in south-eastern Ukraine, to offer them arguments to reach some sort of compromise. "We are ready for this, we want this. It is imperative that our partners in Kiev want this," the Russian leader said.

He noted that Moscow "heard a hundred times that it was necessary for Russia to comply with the Minsk agreements." "But that’s what we want to do," the president said.

He added it was necessary to recall what the Minsk accords say and what the actual state of affairs is.

According to Putin, first of all, it is necessary to amend Ukraine’s Constitution and coordinate this with the Donbas region on a permanent basis.

He also pointed to the law on a special status of the Donetsk and Luhansk republics (DPR, LPR). According to the Minsk agreements, it was to be put into effect within 30 days. However, Kiev passed Article 10 to the law, "which says that the law will be applied in practice only after the elections are held, which means, it is postponed once again."