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Ear to the Ground

Fear of Gas War as Russian Firm Hikes Ukrainian Prices

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Posted on Apr 7, 2014

Photo by Thawt Hathje (CC BY 2.0)

Russia and Ukraine drew closer to a war over energy over the weekend as Kiev declared it would refuse to pay for gas at a new, inflated price set by Russian gas company Gazprom last week.

In Kiev, interim Prime Minister Arseniy Yatsenyuk told the cabinet over the weekend that the new price was unfair and Ukraine would not pay it.

“Russia has not managed to grab Ukraine through military aggression, so now they are pursuing a plan to pressure and grab Ukraine through gas and economic aggression,” said Yatsenyuk. Ukraine would continue buying gas at the “acceptable market price” of $268 per 1,000 cubic meters, he said.

The Guardian reports:

Last week, Russia announced two successive price hikes in gas for Ukraine, taking it up to $485.50. It is unclear what Russia will do if Ukraine refuses to pay the new price, but in the past it has shut off the supply. Last week, Gazprom’s CEO, Alexei Miller, gave televised comments explaining why Russia was raising the gas price, noting that part of the discount had come when Russia extended credit to Ukraine last December as part of a package that was given to the former president, Viktor Yanukovych, for turning his back on an association agreement with the European Union.

“The discount was given on the condition that Ukraine would pay all its gas debts and pay 100% for the current deliveries, and it was clearly indicated that if this did not happen, the discount would be annulled in the second quarter of 2014,” said Miller. He said that Gazprom had “not received a single dollar” in payment for March deliveries, and thus the discount had automatically been annulled.

… Gas prices have long been a thorny issue between Russia and Ukraine, with Europe accusing Russia of using energy supplies as a political weapon. Russia has cut off gas to Ukraine twice before, in 2006 and 2009. In the first stand-off Gazprom accused Ukraine of siphoning off transit gas meant for the EU to serve its domestic needs, while in 2009 gas was cut off completely, leaving some EU markets without gas in the depth of winter.

Read more here.

—Posted by Alexander Reed Kelly.

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