Gazprom CEO Aleksey Miller has announced Ukraine will no longer receive the $100 discount it enjoyed under the Kharkov Agreement, and will pay $485 per thousand cubic meters starting from April.
The statement came after Miller met with the head of Ukraine’s state gas company Naftogaz, Andrey Kobolev in Moscow. Naftogaz is responsible for the majority of Ukraine’s unpaid gas bills.
The price rise follows a cancellation of the Black Sea hosting deal. On Wednesday President Vladimir Putin signed a Federal law ending Russia’s commitment to the Kharkov Agreement, as the Black Sea port of Sevastopol is now under jurisdiction of the Russian Federation.
Under the April 30 2010 Kharkov Agreement, Russia guaranteed Ukraine a $100 gas discount in return for using the Sevastopol port to host its naval fleet.
The decision to end duty-free gas exports to Ukraine is supported by Russia's Prime Minister Dmitry Medvedev, who said Gazprom's should apply general tariffs on exported gas for everybody.
“You should be guided by the commonly set export duty rates for gas without applying any discounts and preferences,” Medvedev told Gazprom head.
Half of natural gas imported by Ukraine comes from Russia. The country owes $2.2 billion for gas that has been delivered in 2013 and 2014, according to Miller.
“We’ll hope that in the near future Ukraine will start paying its debts and current supplies, though we see that the situation isn’t improving, but only getting worse,” Miller said.
Last December, Russia offered Ukraine’s Yanukovich-led government a $15 billion loan and a 33 percent discount on natural gas; a lifeline to help its faltering economy. Following the Kiev protests and a new government taking over, both deals have been cancelled.
On April 1 the price Ukraine paid for gas went up 44 percent to $385, after Kiev failed to meet its debt repayments.
On May 1, everyday Ukrainian consumers, and not just gas utilities, will start paying 50 percent more for gas, part of a planned price hike. Before Naftogaz bought natural gas from Russia at a discounted price and sold to customers for even cheaper, which has led to massive debts for the state monopoly. Naftogaz, which is on the verge of bankruptcy, says it anticipates more than $7 billion in losses this year.
Ukrainians may be pinched further by the terms of an IMF loan, which conditions the state to jettison gas subsidies, and has customers pay more. Comments (86)
Poster Comment:
Toni Lehto Gazprom is doing an ample job of sabotage without US help. Gazprom serves and finances the RF first and foremost, not the Zio Wall Street parasites. In a market valuation as a parasitical western corp it's market cap would be right there with Saudi Aramco's hypothetical $10T. But all of that is smoke and mirrors anyway as we all know that western corps market caps are based on 100x+ PE when the norm used to be 10-12x PE back in the 60's-70' when common sense was not some mythical thing from some mythical past. Smart chick, pretty too
http://rt.com/business/russia-gas-price-ukraine-113/<
Tatarewicz: West will have to pay for this extra cost of gas from Russia or Ukrainian voters will read the riot act at the next election. Russia could probably use more sanctions which give such benefits.