GORKI, March 4 (RIA Novosti) – The head of Russia’s state energy giant Gazprom said Tuesday that it will annul its discount on natural gas sales to Ukraine from April, a move that will further stretch Kiev’s teetering finances.
Alexei Miller, who made the announcement while meeting with Prime Minister Dmitry Medvedev outside Moscow, motivated the decision by pointing out that Ukraine is $1.55 billion in arrears on payments for natural gas deliveries.
“The decision that you have taken about canceling subsidies on deliveries seem, in these conditions, perfectly fair,” Medvedev said.
Ukraine’s national oil and gas company Naftogaz Ukrainy had as of February 14 paid Gazprom $1.28 billion for gas delivered last year and had asked to postpone payment of what remained until April 15.
Gazprom said in early February that Ukrainian debt for 2013 deliveries stood at $2.63 billion, meaning that Naftogaz had around $1.35 billion still to pay at the middle of the month.
Naftogaz bought around 13 billion cubic meters of gas from Russia in 2013 at the rate of $400 per thousand cubic meters.
That price was substantially reduced in December to $268.5 per thousand cubic meters.
The discount was part of a raft of support mechanisms devised by Russia for Ukraine following the latter’s decision in late November to back away from signing a deal that would have deepened political and economic relations with the European Union.
Under the arrangement between Naftogaz and Gazprom, the size of the discount was to be determined on the first day of every new quarter and formalized within 10 days. Failure to renew the discount deal by April 10 would cause it to cease having effect.
Moscow has so far paid $3 billion out of a promised $15 billion loan, which was to be issued as payment for internationally listed Ukrainian bonds.
Critics of the loan and discount package have argued that it was devised as a bribe to induce Ukraine to cement its ties with Russia, spurn the European Union and defer much-needed structural economic reforms.
The chances of the remainder of the Russian loan being provided looks slim since last month’s ouster of Ukrainian President Viktor Yanukovych, who was chased out of office at the culmination of three months-long protests initially provoked by his decision on the EU deal.
The incoming Ukrainian government confirmed by parliament last month is viewed with deep suspicion by the Kremlin, which has nonetheless vaguely committed to cooperating with the international community on providing its western neighbor with financial assistance.
Interim Prime Minister Arseny Yatsenyuk has warned of his country’s desperate financial state and that unpopular decisions would urgently need to be taken.
Delegations from the EU and the International Monetary Fund are visiting Ukraine this week to assess the country’s needs as it faces a wave of looming financial and security crises.