Starting April 1, Gazprom will no longer offer Ukraine discounted gas prices because it is more than a year and $1.5 billion late on their debt payments to Russia’s largest gas producer for deliveries, Russian President Vladimir Putin said Tuesday.
“If you don’t pay us and your debt is ever-increasing, there is no discount, this makes perfect commercial sense for Gazprom,” Putin said speaking to a small group of reporters at his residence outside of Moscow.
Gazprom CEO Alexey Miller, in a separate televised comment on Tuesday, confirmed the current standing $1.5 billion and will reach $2 billion by the February.
“If they don’t get payments on time from Ukrainian partners, then they act according,” the President said, insisting the any gas cut off wouldn’t be political, but economic.
“Like any other major company they have revenues, expenditures, and budgets,” the president said.
In December President Putin and his counterpart Viktor Yanukovich signed a series of aid packages for Ukraine, including a gas discount that reduced the price of Russian gas to $268.50 per 1,000 cubic meters down from $400.
Gazprom chief Alexei Miller said Tuesday in televised remarks that Ukraine has accumulated a $1.5-billion debt for Russian gas supplies. He added at a meeting with Russian Prime Minister Dmitry Medvedev that Gazprom will cancel a price rebate for Ukraine starting April 1.
Under the agreement, Gazprom has the right to revisit the discount every quarter, and decide whether or not to renew it.
The 33 percent discount was meant to help Naftogaz, Ukraine’s nearly bankrupt national oil and gas company. Ukraine’s coup-appointed Prime Minister, Aresny Yatsenuk, has suggested privatizing portions of Ukraine’s energy sector, blaming Naftogaz for eating away profits.
Included in the deal was a total of $15 billion in aid, and the first $3 billion installment was placed in Eurobonds on the Irish Stock Exchange in December 2013.
Gas tiffs and pricing disputes over advanced payments have caused major supply disruptions, both in the winters of 2006 and 2009, leaving many European customers out in the cold.
Ukraine currently imports more than half of its gas from Russia, but has its sights set on energy independence by 2020. Before Euromaidan protests hit the country, Ukraine signed a shale gas deal with Chevron for $10 billion.
Russia is building a maze of pipelines to the north and south, to ensure more reliable supply to European customers, and Ukraine is wooing foreign companies in joint ventures in shale and offshore reserves.