1 Apr 2014

Big gas price rise for Ukraine

9:37 pm on 1 April 2014

Russian natural gas producer Gazprom has announced a more than 40 percent increase in the price Ukraine must pay for gas, stepping up economic pressure on Kiev in its political standoff with Moscow.

Ukraine will now have to pay $US385 per 1000 cubic metres of gas in the second quarter - an increase from $US268 that was agreed in December last year - and before the ousting of Ukraine's Moscow-backed president and Russia's annexation of Crimea from Ukraine.

Gazprom's chief executive officer Alexei Miller said on Tuesday the increase was needed because Ukraine's debt for unpaid gas bills now stood at $US1.7 billion.

Russian President Vladimir Putin agreed in December to cut the gas price for Ukraine and provide a financial lifeline to Kiev after its abrupt decision not to sign a trade agreement with the European Union and rebuild economic ties with Moscow instead. The discount was subject to a quarterly review, Reuters reports.

After Ukrainian President Viktor Yanukovich was deposed in February this year after months of anti-government protests, Gazprom and Mr Putin said the gas price discount would be scrapped because of the debt.

The price of $US385.5 is above the $US370 Gazprom charges its clients in the EU on average, but slightly below the price of $US386-$US387 which Kiev had said it expected.

Ukrainian Prime Minister Arseny Yatseniuk has said the country will need energy from the EU to protect it from the repercussions of its standoff with Moscow, on which it depends for over half its oil and gas.