Accessibility links

Breaking News

Gazprom Says Gas Price For Ukraine Could Double

Gazprom CEO Aleksei Miller
MOSCOW/KYIV (Reuters) -- Russia's Gazprom has said that gas prices for Ukraine could more than double next year if the two countries, trying to clinch a last-minute gas suppply deal, switch to market terms in gas trade.

Top Russian and Ukrainian energy executives are holding another round of talks in Moscow in an attempt to sign the deal that would allow Kyiv to receive gas after January 1 and guarantee smooth transit to Europe.

The two countries are locked in the fourth gas row in as many years over debts and prices for next year. Gazprom said there was a 50 percent chance of cutting supplies from January 1 if Ukraine fails to pay its debts.

It also said the gas price for the next year may be much higher than the $179.5 per 1,000 cubic meters (tcm) Kyiv currently pays.

"In the case of switching to market, European prices, the price for Ukraine should amount to $418 per 1,000 cubic meters," Gazprom's press service quoted the firm's chief executive officer, Aleksei Miller, as saying during the talks.

Gazprom has said it would switch gradually to European market prices in the gas trade with former Soviet countries, which currently pay significantly less than the $500 per tcm Gazprom charges its European clients.

Europe Watching Closely

Europe will be closely eyeing the dispute. It gets one-quarter of its gas from Russia, most of which is transported across Ukraine. A supply cut in January 2006 after a similar row between Kyiv and Moscow briefly affected European consumers.

Russian Prime Minister Vladimir Putin said he discussed the issue with Ukrainian President Viktor Yushchenko during their one-hour long telephone conversation on December 29, but added that the deal has yet to be reached.

Asked what was the reason for the delay, Putin said: "They don't want to pay."

The dispute is being played out as the economies of both countries grapple with the effects of the global financial crisis. Ukraine's already ailing state energy firm Naftogaz has to pay debts of more than $2 billion, according to Gazprom.

Gazprom's export boss Aleksander Medvedev said Gazprom still hoped to sign this year a gas supply deal with Ukraine for 2009. The gas firm has said it will sign the next year agreement only after Ukraine fully pays the debt.

"We hope our proposals would be accepted and we will begin the new year with a new contract which will allow to soothe fears of population in Europe, Ukraine, and Russia," he told state television Vesti 24.

Gazprom has already warned European customers it fears Ukraine could resume what it describes as siphoning gas from transit pipelines. Kyiv says it will respect all obligations and has enough reserves in underground storage to withstand a cut.