Ukraine slapped with gas-price jump

Russia ratcheted up pressure on Ukraine with a 26 percent increase in the price of natural gas after Foreign Minister Sergei Lavrov said NATO shouldn’t expand its presence in eastern Europe.

The price increase will be made “automatically” to $485 per 1,000 cubic meters starting in April after the Russian government annuls an export-duty exemption for OAO Gazprom, Alexey Miller, chief executive officer of the natural-gas export monopoly, said today during a televised meeting with Prime Minister Dmitry Medvedev.

The move intensifies the economic squeeze on Ukraine, which relies on Russia for about half its gas, as the country struggles to stay solvent after winning a preliminary deal with the International Monetary Fund on March 27 to unlock $27 billion in international aid. Russia also questioned NATO’s increase of its forces in eastern European member nations in response to the Ukraine crisis.

“We expect NATO to respect certain rules,” Foreign Minister Sergei Lavrov told reporters today in Moscow. “There shouldn’t be a permanent extra military deployment on the territory of eastern European states.”

The presence of as many as 40,000 Russian soldiers along Ukraine’s eastern border is fueling concern that the Kremlin may invade on the pretext of protecting Russian speakers in eastern and southern Ukraine. President Vladimir Putin says the government in Kiev is influenced by anti-Russian extremists.

Price Squeeze

The jump in energy costs follows a 44 percent increase this month after a discount deal expired. Ousted President Viktor Yanukovych won a lower price at the end of last year as he grappled with protests after ditching an association agreement with the European Union, on top of a previous discount in April 2010.

Gazprom said today that state-owned NAK Naftogaz Ukrainy owes more than $2.2 billion for gas and must take steps immediately to repay its debt while adding more fuel to storage to ensure uninterrupted transit to Europe.

The moves raise the prospect that state-run Gazprom may threaten to halt sales to Ukraine. European shipments were disrupted at least twice since 2006 when Russia cut Ukraine’s supplies during price disputes.

Ukraine is “ready” to borrow $2 billion from Russia to pay for gas, Energy Minister Yuri Prodan told reporters in Kiev.

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