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Gas price for Ukraine to rise to $485 – Gazprom head

Published time: April 03, 2014 11:26
Edited time: April 05, 2014 10:33
Prime Minister Dmitry Medvedev (R) and Gazprom Head Alexey Miller (RIA Novosti / Mihail Mokrushin)

Prime Minister Dmitry Medvedev (R) and Gazprom Head Alexey Miller (RIA Novosti / Mihail Mokrushin)

Gazprom CEO Aleksey Miller has announced Ukraine will no longer receive the $100 discount it enjoyed under the Kharkov Agreement, and will pay $485 per thousand cubic meters starting from April.

The statement came after Miller met with the head of Ukraine’s state gas company Naftogaz, Andrey Kobolev in Moscow. Naftogaz is responsible for the majority of Ukraine’s unpaid gas bills.

The price rise follows a cancellation of the Black Sea hosting deal. On Wednesday President Vladimir Putin signed a Federal law ending Russia’s commitment to the Kharkov Agreement, as the Black Sea port of Sevastopol is now under jurisdiction of the Russian Federation.

AFP Photo / Viktor Drachev

Under the April 30 2010 Kharkov Agreement, Russia guaranteed Ukraine a $100 gas discount in return for using the Sevastopol port to host its naval fleet.

The decision to end duty-free gas exports to Ukraine is supported by Russia's Prime Minister Dmitry Medvedev, who said Gazprom's should apply general tariffs on exported gas for everybody.

“You should be guided by the commonly set export duty rates for gas without applying any discounts and preferences,” Medvedev told Gazprom head.

Half of natural gas imported by Ukraine comes from Russia. The country owes $2.2 billion for gas that has been delivered in 2013 and 2014, according to Miller.

“We’ll hope that in the near future Ukraine will start paying its debts and current supplies, though we see that the situation isn’t improving, but only getting worse,” Miller said.

Last December, Russia offered Ukraine’s Yanukovich-led government a $15 billion loan and a 33 percent discount on natural gas; a lifeline to help its faltering economy. Moscow went through with the purchase of a $3 billion Eurobond from Kiev, though Russia later froze both the gas deal and the credit-line due to events on the ground.

On April 1 the price Ukraine paid for gas went up 44 percent to $385, after Kiev failed to meet its debt repayments.

On May 1, everyday Ukrainian consumers, and not just gas utilities, will start paying 50 percent more for gas, part of a planned price hike. Before Naftogaz bought natural gas from Russia at a discounted price and sold to customers for even cheaper, which has led to massive debts for the state monopoly. Naftogaz, which is on the verge of bankruptcy, says it anticipates more than $7 billion in losses this year.

Ukrainians may be pinched further by the terms of an IMF loan, which conditions the state to jettison gas subsidies, and has customers pay more.

Comments (64)

 

Natasha 18.06.2014 00:41

Good! So the oligarchs will not have much chance to make another billion on re-selling it to the West, as before;

 

Emmett 13.04.2014 20:10

Owen Roberts 06.04.2014 09:33



Bec ause Russia won't do that, West now gets to (attempt) to play savior.

  


Th e west is looking for a savior. They can't afford to save themselves less more Ukraine. LOL.

The emperor (US) has no clothes and no money, neither does EU. The US and EU house of cards is falling down.

The US and EU intend to loot Ukraine. They didn't sign up to put out any money to help the people which is why they (EU and US) are complaining about a legitimate debt Ukraine owes. Ukraine can sell some of their gold to pay their debt IF they can get their gold.

 

Owen Roberts 06.04.2014 09:33

Not sure this is the best plan. I think Russia's gamble is that increasing the price will make Ukraine regret their decision.

But maybe upping the oil price will only make it easier for the West to convince the Ukrainians that Russia couldn't care less.

If Russia left the oil price at it is, then let time pass; when Western policies begin to fail, the Ukrainians will look at Russia as the one providing an alternative and their views will be swayed back.

Because Russia won't do that, West now gets to (attempt) to play savior.

View all comments (64)
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