Financial News

  • 2 April 2014, 12:05

Russia Scraps Ukraine's Large Gas Discount

Ukraine has lost a discount on its supply from Russian gas firm Gazprom, meaning it will have to pay as much as 40% more for its supplies.

It came after Kiev upset Moscow by approving the holding of joint military exercises with Nato close to Russia's newly annexed region of Crimea.

Alexei Miller, the head of state-ownedáGazprom, said the price for the second quarter of the year would be $385.50 per 1,000 cubic metres, up from $268.50 per 1,000 cubic metres.

The Russian discount was part of a financial lifeline Russian President Vladimir Putin offered Ukraine's previous president, Viktor Yanukovych, after his decision to ditch a pact with the European Union in favour of closer ties with Moscow.á

The loss of the discount is expected to eventually hit Ukrainian consumers hard. Household gas prices in Ukraine are set to rise 50% from May 1.

The Russian parliament has also moved to annul agreements with Ukraine to rent Russia's Black Sea Fleet's base in Crimea until 2042 for $98m (ú59m) a year and discounts for Russian natural gas.

Ukrainian prime minister Arseny Yatseniuk has said the country will need energy from the EU to protect it from the repercussions of its standoff with Moscow, on which it depends for over half its oil and gas.á

Russia also warned Ukraine against integrating with Nato, reminding Kiev on Tuesday that its previous attempts to move closer to Nato had unwelcome consequences.

ButáNato foreign ministers meeting in Brussels used the gathering to reinforce the message that Russia's annexation of Crimea will not be condoned.

They unanimously agreed to suspendáNato's military and civilian cooperation with Russia, describing its move on Crimea as a "flagrant breach of Russia's international commitments."

Nato Secretary General Anders Fogh Rasmussenácalled it the "greatest threat to European security in a generation."

Mr Putináordered a partial withdrawal of forces from the Ukrainian border region on Monday, but US officials have said they believe there are still tens of thousands of troops on the eastern side of the country.

The Nato chief and German Chancellor Angela Merkel both said they could not confirm whether Russian troops had withdrawn from the Ukrainian border.

The Ukrainian parliament has also voted to order police to disarm all illegal armed units.á

It came after a police raid on the central Kiev hotel headquarters of a far right nationalist organisation that was instrumental in the February rise to power of Ukraine's new pro-European leaders.

Balaclava-clad members of Pravy Sector (Right Sector) are regularly seen roaming around Kiev - a presence Russia has used to delegitimise Ukraine's new authorities.

But there are fears that attempts to clamp down on a sizable nationalist component in Ukrainian politics could provoke a further uprising.

Last week one of the leaders of Right Sector was shot dead while resisting police.

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