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Russia hikes gas price for Ukraine

By Vladimir Isachenkov

Associated Press

Published: Tuesday, April 1 2014 10:45 a.m. MDT

"This is not what we have seen," he told reporters in Brussels. "And this massive military buildup can in no way contribute to a de-escalation of the situation, a de-escalation that we all want to see, so I continue to urge Russia to pull back its troops, live up to its international obligation and engage in a constructive dialogue with Ukraine."

German Chancellor Angela Merkel told a news conference in Berlin that she could not confirm any withdrawal. Even if Putin had removed some troops, she said, "it is also certainly not the final step... the troop concentration on the Ukrainian border is very high."

Germany's foreign minister, Frank-Walter Steinmeier, renewed a push for internationally backed direct talks between Russia and Ukraine amid "small signals of de-escalation" including the launch of an international observer mission.

"What will be important in the coming days is getting Russia and Ukraine around a table together," Steinmeier said at a meeting with his French and Polish counterparts in Weimar, Germany. He said that could be done in an international framework — "it can be a contact group, it can be a support group."

Russia has used financial levers to hit Ukraine, which is teetering on the verge of bankruptcy. Gazprom's Miller said that the decision to charge a higher price in the second quarter was made because Ukraine has failed to pay off its debt for past supplies, which now stands at $1.7 billion.

On Tuesday the Russian parliament moved to annul agreements with Ukraine on Russia's navy base in Crimea. In 2010, Ukraine extended the lease of Russia's Black Sea Fleet's base until 2042 for an annual rent of $98 million and discounts for Russian natural gas. The lower house voted to repeal the deal Monday, and the upper house was to follow suit.

Russian Prime Minister Dmitry Medvedev has said that Russia had given Ukraine $11 billion in gas discounts in advance and should claim the money back once the lease deal is repealed — a threat repeated Tuesday by Deputy Foreign Minister Grigory Karasin.

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

Ukraine has agreed to gradually withdraw subsidies under a deal with the IMF 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. Household gas prices in Ukraine are set to rise 50 percent beginning May 1.

Leonard reported from Kiev. John-Thor Dahlburg in Brussels, David Rising in Berlin and Geir Moulson in Weimar, Germany contributed to this report.

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