Ukraine’s Yatsenyuk Rejects Russian Gas Price as Aggression

Ukraine Prime Minister Arseniy Yatsenyuk at a government meeting today said Russia’s plan to raise the natural gas price by 80 percent to what he called the highest price in Europe is “aggression against Ukraine.”

Yatsenyuk said Ukraine was ready to pay off its debt to OAO Gazprom (GAZP) and that the first quarter gas price was acceptable. Russia canceled discounts it offered to Kiev on April 1, raising the price to $485 per 1,000 cubic meters from $268.50, and has threatened to cut off supplies if Ukraine doesn’t pay its $2.2 billion debt.

Ukraine relies on Gazprom for half its gas, while carrying about 15 percent of European supplies through its pipelines from Russia, making it a linchpin in the continent’s energy security. Ousted President Viktor Yanukovych won a lower price at the end of last year by ditching an association agreement with the European Union, leading to protests that resulted in his flight to Russia. The new government in Kiev has since signed political parts of the EU deal.

“Apart from the Russian army and guns, they decided to use one of the most efficient tools, which are political and economic pressure,” Yatsenyuk said.

Stockholm Appeal

Ukraine will appeal to an arbitration court in Stockholm if it fails to reach an agreement with Russia on the gas price, Energy Minister Yuri Prodan told reporters today in Kiev.

Ukraine will continue to fulfill its transit obligations on gas shipments to Europe if Russia cuts supplies to Ukraine, Prodan said.

Prodan will travel to Brussels on April 8 for talks over Ukraine’s plans to import gas from the EU, Yatsenyuk said, adding that Ukraine is considering partnering with EU and U.S. investors to modernize and manage the country’s gas pipeline network.

Ukraine, which seeks to import 20 billion cubic meters of gas a year from Europe, is currently importing 20 million cubic meters a day, Prodan said.

Gazprom said reverse flows of gas into Ukraine from Europe raise legal questions, Interfax reported today, citing Chief Executive Officer Alexei Miller.

Gazprom didn’t immediately respond to a phone call to its media center today seeking comment.

Yesterday, Gazprom spokesman Sergei Kupriyanov said the company will fulfill its contractual obligations and continue shipments if it receives payment for past supplies. Kiev’s draft budget last month was based on a Russian gas price of about $480 per 1,000 cubic meters, he said.

To contact the reporters on this story: Jake Rudnitsky in Moscow at jrudnitsky@bloomberg.net; Daryna Krasnolutska in Kiev at dkrasnolutsk@bloomberg.net

To contact the editors responsible for this story: Alaric Nightingale at anightingal1@bloomberg.net Chris Malpass, James Herron

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