Gazprom cancels discount on gas supply for Ukraine
RUSSIAN-state owned utility Gazprom will strip Ukraine of its discount for gas prices from April, it said yesterday, as chief executive Alexey Miller claimed the country owes debts of $1.529bn (£920m) to his company.
Gazprom says it has not received payments for gas sent in January, adding to huge debts accumulated debt over the past year. Gazprom will cancel a deal struck with ousted Ukrainian President Yanukovich in December, which had cut prices by around a third.
Many countries in the EU are supplied with gas from Russia that is piped through Ukrainian routes. Existing gas reserves in Ukraine are thought to be able to last for around four months if Russian supplies were suddenly cut off.
European Commissioner for energy Guenther Oettinger told journalists yesterday that he was not concerned about the potential for short term disruption of supplies to the EU, but that the situation would be different if Ukraine was to be split.
“If the situation escalates, oil prices could rise, as could gas prices. Russia has threatened to cut off the gas supply before and that could happen again now. Naturally, this situation is undesirable, especially as the economic recovery is still so fragile,” said Maarten-Jan Bakkum, senior emerging market strategist at ING IM.
“The Ukraine crisis is perhaps another reminder to European policymakers that they cannot rely on an unambiguously favourable international environment to sustain and strengthen the nascent recovery,” added Jonathan Loynes of Capital Economics.
The possibility that crucial energy supplies to Ukraine could be cut off is not without precedent: supplies were curtailed during winters in 2005-06 and 2008-09.