Russia nearly doubled the price Ukraine pays for its gas this week, forcing Kiev, whose economy is in chaos, to enter into emergency talks with European neighbors to boost cheaper imports from the West. Ukraine accuses Russia of using the price hikes as a tool of economic pressure after popular protests in Kiev ousted pro-Russian president Viktor Yanukovich in February, souring relations between the two former Soviet republics.
Russia seized Ukraine's Crimea region and formally annexed it last month widening the dispute into the biggest stand-off between Russia and the West since the end of the Cold War. "Our Russian neighbors have carried out yet another form of aggression against Ukraine - aggression through its gas supplies. This price is the highest on European territory and it is not an economic but a political price," said Prime Minister Arseny Yatseniuk at a cabinet meeting. Ukraine is still in talks with Russia to cut the gas price, which Moscow raised to $485 per 1,000 cubic meters from a previously discounted price of $268.50, making it now by far the highest price paid in Europe for Russian gas.
The Russian gas export monopoly Gazprom says that on average it charges its European customers between $370 and $380 per 1,000 cubic meters. Ukraine imports more than half its gas needs from Russia. "If we don't come to an agreement [with Russia] then there is a procedure laid out in our contract, going to the arbitration court in Stockholm," Ukrainian Energy Minister Yuri Prodan told journalists before a cabinet meeting. "We are not trying to break our contract but to set up a fair price like in Europe," he said.
Alexei Miller, Gazprom's chief executive officer, said in a Rossiya 24 television interview recorded on Friday and aired on Saturday that Ukraine had accepted the new price. "The gas price included in Ukraine's budget is the price that is already at work today, $485, and this confirms one more time that Ukraine recognizes it as a market [price], recognizes the current agreement and is ready to pay that price for our gas," Miller said. According to a 2009 contract, the price is calculated on the basis of several fuel product prices and Yatseniuk said there were no economic grounds to increase prices for gas.
In raising the price, Russia scrapped two discounts. One was introduced in 2010 when Ukraine agreed to extend terms for Russia's Black Sea Fleet in Crimea until 2042 and the second was agreed in December after Yanukovich scrapped a trade deal with the EU in favor of closer ties to Russia. Miller said that the discounts have disappeared "all strictly according to the contract" because Kiev has not paid for deliveries. He said the unpaid bill rose to $2.2 billion as of the end of March from $1.4 billion in December. "They [Ukraine] fully understand why this discount has disappeared, they fully understand that the cancellation of the discount is Ukraine's fault," Miller said, adding: "We cannot supply gas for free."
Emergency talks
