Russia Raises Gas Price For Ukraine, Demanding $11 Billion In Back Payments

March 24, 2014Ukraineby EW News Desk Team

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Russia is set to charge Ukraine $500 for 1,000 cubic metres of natural gas, reported the New York Times on Sunday, $100 more than what it was already charging and nearly a third higher than what Russia’s gas company, Gazprom, charges clients elsewhere.

According to NYT, Moscow had agreed to give a $100 discount to Ukraine for natural gas back in 2010, when it renewed the lease for its Black Sea naval fleet in the Crimean Peninsula. However, as Russia now considers Crimea to be part of its territory, it believes that it is no longer obliged to offer Ukraine discounted gas.

Additionally, Prime Minister Dmitry Medvedev said last Friday that he would pursue back payments from Ukraine for past discounted natural gas, as Ukraine has been receiving the discount since 2010 even though the new lease agreement was only set to be in place by 2017.

"The Ukrainian state saved some $11 billion dollars and accordingly the Russian budget has a missed profit of the same $11 billion," Medvedev said, as cited by AFP.

"I believe that we cannot lose such money taking into account the fact that our budget is also struggling," Medvedev added in comments released by the Kremlin.

Ukraine’s new prime minister, Arseniy P. Yatsenyuk, slammed the Russian government’s decision as unfair, given that annexed territory was now being used to justify the amendment of a commercial energy contract.

“Russia, because it committed armed robbery of Ukraine, and in this way in fact destroyed our bilateral agreement, wants to raise the price of gas for Ukraine,” Yatsenyuk told reporters.

He admitted however Ukraine could not decline to buy gas from Russia, given the country’s dependence on the fuel.

In the long run, Yatsenyuk said, Ukraine would focus on creating a system for importing fuel from Europe, where natural gas would costs about $150 less per 1,000 cubic metre than the new Russian asking price.

“We need reverse flows of gas from the European Union to support Ukraine’s energy security,” Yatsenyuk said.

Related: Ukraine’s Real Problems Have Yet To Be Addressed

Related: Why Russia Really Wants Crimea

Related: Why Russia Fears ‘Losing’ Ukraine

Along with cancelling the discount deal, Russia further stepped up economic pressure on Ukraine in other areas of trade and investment. Moscow has now closed its border to most Ukrainian trucks, whilst shutting a prominent Ukrainian-owned factory in Russia.

According to NYT, Ukraine’s Foreign Ministry, with little other options available, issued a note of protest to Russia on Friday, describing the factory closing as “politically motivated.”    

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