Russia’s state-run natural gas company has announced it was ending Ukraine’s gas discount and increasing its price by about 44 percent.
Gazprom CEO Alexei Miller said the company was ending the deal it had struck with the previous pro-Russian Ukrainian government to subsidize natural gas prices. But the change of Ukraine’s government also means a change in their natural gas bill, Miller said. Gazprom will be increasing the price Ukraine pays for gas from about $268 per thousand cubic meters to about $385 per thousand cubic meters.
“The gas discount can no longer be used,” Gazprom Chief Executive Officer Alexey Miller said in an email on Tuesday.
According to Reuters, CEO Miller also mentioned that Ukraine’s unpaid gas bill stood at $1.7 billion as of Tuesday. This is how much debt the country has racked up for not paying its past energy bills, something Russia let slide until recently.
Ukraine gets about 40 percent of its energy comes from natural gas, about half of which is imported from Russia. Europe and the U.S. have been worried that Russia’s energy hold over the country could be used to create economic woes that could drive more civil unrest.
Much of the fear stems from more than Russia raising natural gas prices to punish Ukraine for deposing its pro-Russian government and for opposing the dubious secession of its Crimean Peninsula. Western countries fear that Russia could halt gas supplies to Ukraine altogether which could cause more unrest.
Russia has already halted crude oil deliveries to a Ukrainian refinery because of payment issues. Russia has also stopped gas flows to the country in recent times — the last time being in 2009 when a pricing dispute caused Russia to stop gas flowing through Ukraine for about two weeks.
Europe worries that if Russia stops gas from flowing through Ukrainian pipelines it could cut off some supply to the rest of Europe, which gets about one-third of its gas from Russia. A substantial amount of Russian gas flows to Europe through Ukrainian pipelines.
U.S. lawmakers have been pushing the Obama administration to approve more liquefied natural gas (LNG) terminals to help wean Ukraine and Europe off of Russian energy. But this is not a short-term fix as LNG export terminals can take years to get up and running once approved and also require import terminals to be built in Ukraine.
“We can supplant Russia’s influence, but we won’t so long as we have to contend with the Energy Department’s achingly slow approval process,” House Majority Leader Rep. John Boehner, an Ohio Republican, said on the House floor last month.
The Obama administration Energy Department has received applications for 24 LNG export terminals, but only approved six of them. Republicans want more to supplant Russian President Vladimir Putin’s hold on Ukraine and the rest of Europe.
The Energy Department has said it may consider Ukraine’s plight when reviewing export terminals, but the department has yet to pick up the pace in its approvals.
“This amounts to a de facto ban only emboldens Vladimir Putin, allowing him to sell large quantities of natural gas to our allies,” Boehner said. “The President should do the right thing here, and end this de facto ban so we can strengthen our economy here and our security here and abroad.”
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