Ukraine threatens to take Russia to court over gas

Ukraine threatens to take Russia to court over gas

KIEV - Ukraine on Saturday rejected Russia's latest gas price hike and threatened to take its energy-rich neighbour to arbitration court over a dispute that could imperil deliveries to western Europe.

Prime Minister Arseniy Yatsenyuk said Russia's two rate increases in three days were a form of "economic aggression" aimed at punishing Ukraine's new leaders for overthrowing a Moscow-backed regime last month.

Russia's natural gas group Gazprom this week raised the price of Ukrainian gas by 81 percent - to US$485.50 (S$610.95) from US$268.50 for 1,000 cubic metres - requiring the ex-Soviet state to pay the highest rate of any of its European clients.

The decision threatens to further fan a furious diplomatic row between Moscow and the West that has left Kremlin insiders facing sanctions and more diplomatic isolation than at any stage since the 1989 fall of the Berlin Wall.

"Political pressure is unacceptable. And we do not accept the price of $500 (per 1,000 cubic metres of gas)," Yatsenyuk told a cabinet meeting called to get a handle on the economic crisis that threatens to escalate tensions in the culturally splintered nation of 46 million.

The profound scale of the rift between those who see their future tied to either Europe or the Kremlin was underscored when security agents announced the arrest of 15 men who allegedly planned to distribute 300 machineguns for the armed overthrow of the local government of a region neighbouring Russia.

Ukraine's heavily Russified southeastern swaths have sought to stage their own independence referendums similar to the one that resulted in the Black Sea peninsula of Crimea being annexed by Moscow last month.

'Russia will halt deliveries'

Yatsenyuk said Ukraine must now prepare for the possibility that "Russia will either limit or halt deliveries of gas to Ukraine" in the coming weeks or months.

Gazprom's European clients saw their deliveries limited in 2006 and 2009 when the gas giant - long accused of raising the rates of neighbours who seek closer ties to the West - halted Ukraine's shipments due to disagreements over price.

The state gas company supplies about a third of EU nations' demand, despite efforts by Brussels to limit energy dependence on Russia over its crackdown on domestic dissent and increasingly militant foreign stance.

Nearly 40 percent of that gas flows through Ukraine, while the remainder travels along the Nord Stream undersea pipeline to Germany and another link through Belarus and Poland.

Ukrainian Energy Minister Yuriy Prodan said Kiev was ready to take Gazprom to arbitration court in Stockholm if Moscow refused to negotiate over a lower price.

"If we fail to agree, we are going to go to arbitration court, as the current contract allows us to do," Prodan warned.

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