Russia's Gazprom announces big gas price rise for Ukraine

MOSCOW - Reuters

Valves of gas pipe-line are seen not far from Kiev on March 4. AFP Photo

Russian natural gas producer Gazprom announced a more than 40 percent increase in the price Ukraine must pay for gas on Apr. 1, stepping up economic pressure on Kiev in its  political standoff with Moscow.

Ukraine will now have to pay $385.5 per 1,000 cubic metres of gas in the second quarter, an increase form $268.5 that was agreed in December, before the ouster of Ukraine's Moscow-backed  president and Russia's annexation of Crimea from Ukraine.

Gazprom's Chief Executive Officer, Alexei Miller, said the increase was needed because Ukraine's debt for unpaid gas bills now stood at $1.7 billion.

"The December discount for gas cannot be applied any more," Miller said, adding that the transportation tariff for Gazprom's gas to Europe via Ukraine was increasing by 10 percent, in line with earlier agreements.

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.

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

The price of $385.5 is above the $370 Gazprom charges its clients in the European Union on average, but slightly below  the price of $386-$387 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.