Russian gas price will double if Ukraine has debt

18:10, 26 November 2008
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Gazprom has previously...

Russia`s gas monopoly Gazprom threatened on Wednesday to more than double the price Ukraine pays for natural gas next year if it fails to pay off a $2.4 billion debt, according AP via Yahoo!.

Gazprom has previously warned that the price could rise to over $400 per 1,000 cubic meters, but Wednesday`s threat made clear it would be in response to a failure to pay the debt in full. Gazprom also sent a signal that Ukraine`s natural gas company Naftogaz remains under pressure to abide by an agreement reached by both companies Tuesday to pay part of its debt by the end of the month.

Gazprom spokesman Sergei Kupriyanov expressed hope that the gas dispute will not lead to a disruption of supplies to Ukraine and European consumers as was the case in 2006. Most of the gas Russia supplies to Europe goes through Ukraine.

"Without a doubt we will try to take into account all the lessons from that situation and make all efforts to avoid that scenario from happening," Kupriyanov said in a conference call.

But the warning raised the stakes for Ukraine, which is crippled by a severe economic crisis and is struggling to pay off the debt.

Ukraine currently pays $179.50 per 1,000 cubic meters and a price of over $400 could be devastating for the economy.

Russia and Ukraine agreed in October that Russia will raise the price gradually over several years, but Kupriyanov said that will not happen if Ukraine doesn`t pay off the debt. He said the new price would be effective next year, but did not mention a specific deadline for repaying the entire debt, saying only that talks would continue in December.

He also shrugged off suggestions by Ukrainian officials that substantially raising the price would be unfair since world oil prices are dropping amid the global crisis.

Kupriyanov noted that European countries pay Gazprom more than $500 per 1,000 cubic meters and are making their payments while also struggling to cope with the economic crisis.

Naftogaz continues to dispute the amount of the debt.

Naftogaz officials said Wednesday the company owed about $2 billion for gas consumed during the past three months. That apparently does not include some $340 million in fines for delays in payments, which Kupriyanov said Ukraine must also pay.

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