Ukraine to Seek Arbitration Over Russian Gas Price Hike

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Ukraine to Seek Arbitration Over Russia Gas Price Hike

Ukraine has dismissed attempts by Russia to sell its gas to the country at almost double its current price.

The country has also threatened legal action if negotiations with Russia to cut the gas prices back to their original rates failed.

Ukraine, which is already in economic turmoil, is in emergency negotiations for cheaper alternative sources of gas in Europe.

The country points a finger at Russia for using price hikes to apply pressure on its regime, after pro-Russian president Victor Yanukovich was removed from power in February following a successful uprising in Kiev.

“Our Russian neighbors have carried out yet another form of aggression against Ukraine – aggression through its gas supplies. This price is the highest on European territory and it is not an economic but a political price,” said Ukraine Prime Minister Arseny Yatseniuk.

As reported by BBC, Yatseniuk said his country would not accept the price hike, referring to it as political pressure.

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Moscow raised the price of its gas supplies to Ukraine to $485 per 1,000 cubic meters. Previously, Ukraine was receiving the gas supplies at a price of $268.50, which was discounted. The new price stands as the highest paid in Europe for gas from Russia.

Gazprom, which enjoys a monopoly in supply of Russian gas, says it offers its product to customers in Europe at around $380 per cubic meters.

More than 50% of gas used in Ukraine is supplied by Russia.

The country said it would follow the procedure outlined in its contract with Russia, which provides for arbitration in Stockholm, should the current negotiations fail.

A 2009 contract between Russia and Ukraine provides for calculation of gas price based on the cost of a number of fuel products. Ukraine says the raised price does not put into account any economic factors.

According to Reuters, Russia did away with two discounts when it hiked the price of its gas supplies to Ukraine.

To contact the reporter of this story: Jonathan Millet at john@forexminute.com