Gazprom puts pressure on Ukraine to pay its $2.2B gas bill

Russian gas giant Gazprom on Thursday urged Ukraine to pay its debt, and announced a 70 per cent rise in the charge for future supplies.

Russian supplier of natural gas hikes prices to Ukraine by 70%

Russian Prime Minister Dmitry Medvedev, left, meets with Gazprom's chief executive Alexei Miller in Moscow, Russia, on Thursday ahead of an announcement that Gazprom will hike gas prices to Ukraine by 70 per cent. (RIA-Novosti/Government Press Service/Associated Press)

Russian gas giant Gazprom on Thursday urged Ukraine to pay its debt, and announced a 70 per cent rise in the charge for future supplies.

Ukraine relies on Russia for the greater part of its energy consumption. Russia earlier this month cancelled a discount to Ukraine, a few weeks after pro-Russian President Viktor Yanukovych fled the country and an interim government stepped in.

Gazprom said in a statement on Thursday that Ukraine "must take urgent steps to clear the debt that has accumulated." Gazprom's chief executive Alexei Miller met with OleksiyKobolev, head of Ukrainian state-owned Naftogaz, in Moscow on Thursday.

Two days ago Gazprom announced a 44 per cent hike in the natural gas price for Ukraine starting from April 1 to $385.5 US per 1,000 cubic metres. This latest rise takes the price to $485 US per 1,000 cubic metres. ​

Miller, who then met with Russian Prime Minister Dmitry Medvedev, said that his company is scrapping the remaining discount to Ukraine and will be charging it 70 per cent more starting this month, Russian news agencies reported.

Gazprom said on Thursday that Ukraine owes Russia $2.2 billion for gas while Medvedev mentioned a "possibility" of seeking the repayment of an unspecified amount that Ukraine should have paid Russia in export duties. The duty was scrapped in 2010 in return for the extension of the lease for the Russian Black Sea fleet in Crimea. Russia has now annexed the Crimean Peninsula.

U.S. Secretary of State John Kerry on Wednesday pledged to help wean Ukraine off Russian gas. An exemption of a 30-year-old law preventing U.S. suppliers from shipping gas to buyers outside North America would need to be put in place for the U.S. to supply Ukraine's energy needs.

The cost of getting U.S. gas supplies to Europe and the lack of infrastructure on both sides of the Atlantic are major obstacles. 

The Russian moves would fall hard on Ukrainian consumers, who have benefited from generous state subsidies for energy that have kept gas prices low while swelling government debt.

Ukraine, which is teetering on the verge of bankruptcy, has agreed to gradually withdraw subsidies under a deal with the International Monetary Fund that required the country to make its utility costs economically viable for the state by 2018 as condition for up to $18 billion in loans.

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