Ukraine threatens to take Russia to court over gas

Ukraine today rejected Russia's latest gas price hike and threatened to take its energy-rich neighbour to arbitration court over a dispute that could imperil deliveries to western Europe.

Prime Minister Asreniy Yatsenyuk said Russia's two rate increases in three days were a form of "economic aggression" aimed at punishing Ukraine's new leaders for overthrowing a Moscow-backed regime last month.

Russia's natural gas giant Gazprom this week raised the price of Ukrainian gas by 81 per cent - to USD 485.50 from USD 268.50 for 1,000 cubic metres - and now requires the ex-Soviet nation to pay the highest rate of any of its European clients.
 

The decision threatens to further fan a furious diplomatic row over Ukraine's future between Moscow and the West that has left Kremlin insiders facing sanctions and standing more diplomatically isolated than at any stage since the 1989 fall of the Berlin Wall.

"Political pressure is unacceptable. And we do not accept the price of USD 500 (per 1,000 cubic metres of gas)," Yatsenyuk told a meeting to top ministers called to get a handle on the economic crisis that threatens to further escalate tensions in the culturally splintered nation of 46 million.

"Russia was unable to seize Ukraine by means of military aggression. Now, they are implementing plans to seize Ukraine through economic aggression."

Yatsenyuk said Ukraine was ready to continue purchasing Russian gas at the old rate of USD 268.50 because this was "an acceptable price".

But he added that Ukraine must prepare for the possibility that "Russia will either limit or halt deliveries of gas to Ukraine" in the coming weeks or months.

Gazprom's western European clients saw their deliveries limited in 2006 and 2010 when the energy giant - long accused of raising the rates of neighbours who seek closer ties to the West - halted supplies to Ukraine due to disagreements over price.

Gazprom's gas meets about a third of EU nations' demand despite efforts by Brussels to limit energy dependence on Russia amid its crackdown on domestic dissent and increasingly militant foreign stance.

Nearly 40 per cent of that gas flows through Ukraine while the remainder travels along the Nord Stream undersea pipeline to Germany and another link that runs through Belarus and Poland.