Gazprom ups pressure on Ukraine with gas price rise

Tuesday 01 April 2014 08.29
Gazprom raises the price of gas exports to Ukraine by more than a third
Gazprom raises the price of gas exports to Ukraine by more than a third

Russian energy giant Gazprom today announced it was raising the price of gas exports to Ukraine by more than a third.

The move scraps a previous discount amid mounting strains between the two countries. 

Ukraine will now pay a price of $385.5 per 1,000 cubic metres of gas, Gazprom chief executive Alexei Miller said in a statement, raising the price from $268.5 per 1,000 cubic metres previously.

"The discount will no longer apply," he said in a statement. "This is due to the inability of the Ukrainian side to pay for debts from 2013 and realise full payments for current deliveries."

He said that the debt currently owed by Ukraine to Gazprom amounted to $1.711 billion.

Russia has repeatedly shown readiness to use gas as a lever in conflicts with Ukraine, which remains dependent on imports from its resource-rich former Soviet master to keep the country running.

Tensions between Moscow and Kiev are running high after a pro-West government came to power in Kiev following the fall of president Viktor Yanukovych and Russia seized the Crimea peninsula from Ukraine in defiance of the international community.

Europe currently receives about a third of its gas needs from Russia and while the current crisis has prompted new calls for a diversification of energy sources there is little chance of this happening fast.

EU officials nervously eye gas conflicts between Moscow and Kiev after a dispute in early 2009 left much of central Europe without gas in a freezing winter.

The gas price rise by Gazprom - although widely expected - is a new blow to the Ukrainian economy which needs an international rescue to stave off the risk of default.

Ukraine agreed last week to raise  domestic gas consumer prices by up to 50% in order to meet a key loan condition from the International Monetary Fund