Russian natural gas producer Gazprom announced a more than 40% increase in the price of gas for Ukraine on Tuesday, stepping up economic pressure on Kiev in its crisis in relations with Moscow.
Price disputes have in the past led to cuts in Russian gas supplies to Ukraine and decreases in onward deliveries to Europe, but this time the financial blow to Kiev is set to be cushioned by a new International Monetary Fund loan package.
Ukraine will now have to pay $385.5 per 1,000 cubic metres of gas in the second quarter, an increase from the $268.5 agreed in December and higher than the average price for clients in the European Union but around the level Kiev had expected.
The decision, which had been clearly flagged by President Vladimir Putin, ended a discount that had been agreed in December, before the crisis over the ouster of Ukraine's Moscow-backed president and Russia's annexation of Crimea.
Gazprom's Chief Executive Officer, Alexei Miller, said an increase was justified because Ukraine's debt for unpaid gas bills now stood at $1.7 billion U.S., adding that the transportation tariff for Gazprom's gas to Europe via Ukraine was increasing by 10 percent, in line with earlier agreements.
The new head of Ukraine's state energy company Naftogaz, Andrei Kobolev, is expected to visit Moscow this week for talks on Russian gas supplies. Ukraine has been working on reducing its dependence on gas from Russia, which meets a half of its gas consumption.
Before the December discount, Ukraine paid a price of around $400, which Kiev said was unaffordable for its fragile economy.
Gazprom has suggested a new conflict over gas payments and supplies - like disputes in 2006 and 2009 that halted supplies to Ukraine and onward to Europe - could break out, though it has said it has no interest in a resumption of such disputes.
But the IMF has agreed a $14-18 billion U.S. standby credit for Ukraine, in exchange for painful economic reforms, as part of a $27-billion U.S. international package aimed at getting the country's economy on its feet.
The IMF should be ready to hand over the first $3 billion U.S. of the new aid package this month, its top European official has said.
Even so, Prime Minister Arseny Yatseniuk has said Ukraine 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.
Related Stories
