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Russia scraps Ukraine gas deal

March 4, 2014

Russia’s gas giant Gazprom has announced it would cancel a price discount for gas supplies to Ukraine. The move follows the overthrow of Moscow-backed president Viktor Yanukovych with whom Gazprom agreed the deal.

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Image: picture-alliance/dpa

Ukraine was unable to pay its gas bill for February and owed Gazprom $1.5 billion (1.09 billion euros) for earlier gas supplies, Russia's state-controlled natural gas producer Gazprom announced Tuesday.

Therefore, Gazprom would cancel a contract that had granted the government in Kyiv a 30-percent discount on market prices for gas, currently standing at $400 per 1,000 cubic meters, Gazprom Chief Executive Alexei Miller said.

Ukraine's political turmoil exposes economic woes

The measure will come into effect as of April 1, and was described by Russian Prime Minister Dmitry Medvedev as a logic step in view of Ukraine's failure to pay its bills.

If Ukraine was unable to pay for the goods it was receiving, it must bear the consequences, Medvedev told Russian new agency Interfax following a meeting with the Gazprom CEO.

Gazprom's decision comes in the wake of the overthrow of Ukraine's pro-Russian president Yanukovych by anti-government demonstrators at the end of February. Russian President Vladimir Putin has described the overthrow as an unconstitutional coup. In December, Putin offered Yanukovych the gas rebate and a $15-billion bailout in response to his decision to ditch a trade pact with the European Union.

On Tuesday, Gazprom CEO Alexei Miller also said he was offering Ukraine a loan worth between $2 billion and $3 billion to cover its arrears with the company.

Energy ministers in Brussels

Meanwhile, European Union energy ministers were discussing the situation in Ukraine at a meeting in Brussels on Tuesday. German Energy Minister Sigmar Gabriel said the 28-nation EU didn't have to worry about a steady supply of Russian gas, but added that the energy situation in Ukraine gave reason for concern.

“If Europe is serious about helping Ukraine, we need to resolve the country's energy problems,” Gabriel said.

Gabriel also called on fellow EU ministers to support Ukraine in paying outstanding bills to Gazprom. The government in Kyiv is hovering on the brink of bankruptcy and will be unable to pay its bills without outside help.

uhe/hc (AFP, AP, Reuters, dpa)