Russia hikes gas prices for Ukraine, squeezes fragile economy

by Reuters
Thursday, 3 April 2014 11:55 GMT

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MOSCOW, April 3 (Reuters) - Russia increased the gas price for Ukraine to $485 per 1,000 cubic metres and urged Kiev on Thursday to pay its $2.2 billion debt, stepping up pressure on an economy already on the brink of bankruptcy.

The head of Russia's top natural gas producer, Gazprom , told Prime Minister Dmitry Medvedev that from this month the price would rise by 26 percent after Moscow introduced an export duty on gas to Ukraine.

Russia, no stranger to using its economic muscle for geopolitical gains, was incensed when protesters toppled pro-Moscow President Viktor Yanukovich, installing new leaders bent on pursuing closer ties with the European Union.

Russia's annexation of Ukraine's Crimea region last month deepened the worst East-West crisis since the end of the Cold War in 1991.

"The gas price is increasing automatically from April," Alexei Miller told Medvedev, adding that the end of zero-export duties would trigger the rise.

The increase came just two days after Gazprom announced a 44 percent hike in the gas price for Ukraine starting from April 1 to $385.5 per 1,000 cubic metres due to the unpaid bills.

Earlier on Tuesday, Gazprom said Ukraine had to increase the level of gas in storage to ensure its stable transit to Europe.

The European Union receives around a half of Russian gas via Ukraine. (Reporting by Svetlana Burmistrova; writing by Vladimir Soldatkin, editing by Elizabeth Piper)

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