Russia scraps last gas discount to Ukraine, hikes price

Russia scraps last gas discount to Ukraine, hikes price
Russia's Prime Minister Dmitry Medvedev looks on during an interview with Reuters in Moscow, October 31, 2013.

MOSCOW - Russian Prime Minister Dmitry Medvedev said Thursday he has scrapped the last discount on gas price granted by Moscow to Ukraine, effectively raising the price by US$100 to US$485 (S$126 to S$612) for every 1,000 cubic metres.

"I am taking the decision to denounce the government decree from 30 April 2010," Medvedev said, referring to the discount on Russia granted to its neighbour in exchange for keeping its Black Sea Fleet facilities in Crimea's port of Sevastopol.

The decision means that "the price on gas for Ukraine is automatically... going up and will be $485 for 1000cm starting in April," Gazprom chief Alexei Miller told Medvedev as the two were shown meeting on state television.

Putin on Wednesday ended Russia's agreements with Ukraine over the status of its Black Sea fleet, which had been based in Sevastopol since the tsarist era. Moscow has in recent weeks annexed the peninsula.

Medvedev added that Russia is looking into seeking further compensation from Ukraine for the discount granted since the 2010 agreement, which had prolonged Russia's Black Sea fleet lease to 2017.

Tensions between Moscow and Kiev are running high after a pro-West government came to power in Kiev following the fall of president Viktor Yanukovych and Russia seized the Crimea peninsula from Ukraine in defiance of the international community.

In a sign of relentless economic pressure on Ukraine, Gazprom earlier on Thursday said it is demanding that the country pays for all debt accrued for recent gas deliveries.

"Naftogaz Ukraine must take immediate measures to pay off the accrued debt," the Russian company said in a statement after Miller met with head of Naftogaz Andrei Sobolev.

"At this time, the total debt by Naftogaz is estimated at over $2.2 billion including deliveries in March," Gazprom said.

"So let our Ukrainian partners find the necessary finances to pay for their debt and make the current payments, since cooperation in this sphere, as well as other spheres, cannot continue any other way," Medvedev told Miller.

"People who make decisions in Ukraine now should understand this," he said.

Russia has repeatedly shown readiness to use gas as a lever in conflicts with Ukraine, which remains dependent on imports from its resource-rich former Soviet master to keep the country running.

Thursday's price hike came just two days after Moscow got rid of another discount that was in place since December.

That discount had been accorded when President Vladimir Putin met with the former president Viktor Yanukovych.

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