Gazprom hikes Ukraine gas price

Russian energy giant Gazprom has announced a more than 40 percent increase in the price of gas exports to Ukraine, scrapping a previous discount amid mounting strains between the two countries.

Ukraine will now pay a price of $385.5 per 1,000 cubic metres of gas, Gazprom chief executive Alexei Miller said in a statement on Tuesday, raising the price from $268.5 per 1,000 cubic metres which was agreed in December.

The previous discount was part of a financial lifeline Russian President Vladimir Putin offered to former Ukrainian President Viktor Yanukovich after his decision to ditch a pact with the European Union in favour of closer ties with Moscow.

The move fuelled three months of protests which forced Yanukovich to flee to Russia in February.

The discount was subject to a quarterly review.

"The discount will no longer apply," Miller said in a statement. "This is due to the inability of the Ukrainian side to pay for debts from 2013 and realise full payments for current deliveries."

The debt currently owed by Ukraine to Gazprom amounts to $1.7bn, he said. Miller also said that Gazprom would, from the second quarter onwards, be paying 10 percent more to Ukraine for transit of Russian gas to Europe through Ukraine.

Russia has repeatedly shown readiness to use gas as a lever in conflicts with Ukraine, which remains dependent on imports from its resource-rich former Soviet master to keep the country running.

Tensions between Moscow and Kiev are running high after a pro-West government came to power in Kiev following Yanukovich's ouster and Russia seized the Crimea peninsula from Ukraine in defiance of the international community.

Europe currently receives about a third of its gas needs from Russia and while the current crisis has prompted new calls for a diversification of energy sources, there is little chance of this happening fast.

EU officials nervously eye gas conflicts between Moscow and Kiev after a dispute in early 2009 left much of central Europe without gas in a freezing winter.

The gas price rise by Gazprom - although widely expected - is a new blow to the Ukrainian economy which needs an international rescue to stave off the risk of default.

Ukraine agreed last week to raise domestic gas consumer prices by up to 50 percent in order to meet a key loan condition from the International Monetary Fund.