Gazprom hikes Ukraine gas price by a third

Gazprom currently supplies Ukraine with more than half its gas

Related Stories

The Russian energy company, Gazprom has raised the price it charges Ukraine for gas by more than a third.

The company's chief executive Alexei Miller says the change was because Kiev has failed to pay its bills.

He said its current debt to Russia stood at just over $1.7bn (£1.02bn).

Russia had previously offered Kiev a subsidy, but the recent political crisis in Ukraine has led to a deterioration in relations.

Mr Miller says the price of Russian gas for Ukraine has gone up to $385.50 per 1,000 cubic metres in the second quarter of 2014 from the previous rate of $268.50.

It will mean Ukraine paying more than the UK for gas, having previously paid less, according to calculations by ICIS, the energy price-reporting agency.

Its research shows the from 1 April Ukraine will pay 25.40 euros (£21.04, $35.04) per megawatt hour for gas.

That compares to 21.17 euros per megawatt hour in the UK and 18.51 euros per megawatt hour that Ukraine previously paid.

"It's now cheaper for Ukraine to buy elsewhere," ICIS European gas market analyst Tom Marzec-Manser said. What would stop state energy company Naftogaz doing so was the very limited pipeline capacity it had with the EU that could pipe gas eastward, he said.

Smaller pipelines from Hungary and Poland served the country, but were not able to supply enough, enabling Russia to charge more than prices in the UK and the rest of Europe, he said.

The move marks the end of a discount Russia agreed to give Ukraine in December. The deal came after talks between Russian President Vladimir Putin and Ukraine's then President Viktor Yanukovych, in which Russia also said it would buy $15bn-worth of Ukrainian government bonds.

That agreement meant the cost of Russian gas supplied to Ukraine was slashed from more than $400 per 1,000 cubic metres.

US Secretary of State John Kerry US Secretary of State John Kerry will attend Nato talks over Ukraine
Nato meeting

The news comes as Nato foreign ministers prepare to discuss ways to help Ukraine in the first meeting of ministers from the 28 member states since Russia's takeover of Crimea caused a diplomatic crisis.

Ukraine's interim government last week said it will raise gas prices for domestic consumers by 50% to secure an International Monetary Fund (IMF) aid package.

Ukrainians are accustomed to buying gas at heavily subsidised rates. But the IMF has made subsidy reform a condition its deal worth as much as $18bn.

The IMF is also asking Ukraine to crack down on corruption and end central bank support for the Ukrainian currency.

Ukraine's interim Prime Minister Arseniy Yatsenyuk has told parliament the country was "on the edge of economic and financial bankruptcy".

The US Senate and House of Representatives have both passed legislation backing a $1bn loan guarantee to Ukraine.

Russia's economic power lies in its key natural resources - oil and gas. The energy giant Gazprom is close to the Russian state and critics say it is little more than an economic and political tool of the Kremlin. NTV, a national television network, is also owned by Gazprom.

More on This Story

Related Stories

More Business stories

RSS

Business Live

  1.  
    11:32: Areva cost savings
    Areva building

    The French state-controlled nuclear group Areva has a new strategy. It will focus on its nuclear business, which will boost its partnership with utility EDF. It's made losses in the past four years. Now it plans to have made cost savings of 1bn euros (£727m, $1.12bn) by 2017.

     
  2.  
    11:21: Greggs results
    Greggs share price graph

    Greggs shares have gained well after its results - up 3.4%. Earlier it said it made gains from property disposal of £1.5m (2013: £1.3m). Its pre-tax profit was up 41.1% to £58.3m (2013: £41.3m).

     
  3.  
    Via Twitter Robert Peston Economics editor

    tweets: "A win is a win, but @George_Osborne will note ECJ ruled on ECB's lack of authority not on merit of discrimination against non-euro members"

     
  4.  
    10:55: Scottish Power
    Pylons

    Scottish Power has been banned from "proactive sales" for 12 days by Ofgem for failing to meet customer service targets. The energy supplier said it was committed to treating customers fairly.

     
  5.  
    10:43: Indian economy World Service
    Arya

    A trip not to Bollywood but Tollywood for Business Matters presenter Fergus Nicoll in the latest instalment of the programme's trip to Chennai in southern India. Fergus asks how far economic development is provoking social change and interviews Tamil language film star Arya (pictured left). Listen here.

     
  6.  
    10:29: Tesco board
    Tesco

    More boardroom moves at Tesco. Gareth Bullock is stepping down from the main board tomorrow after almost five years, but will remain a director of Tesco Bank. He follows Jacqueline Tammenoms and Liv Garfield, who said last week they would leave. Byron Grote - a director of Unilever, Anglo American, Standard Chartered and Akzo Nobel - will join from 1 May.

     
  7.  
    Via Twitter

    Simon Nixon, chief European commentator for the Wall Street Journal, tweets:

    Huge upward surprise in eurozone retail sales, up 1.1% on month compared to consensus forecast of 0.2%. More evidence recovery strengthening. @Simon_Nixon

    Shopping
     
  8.  
    10:13: Household incomes BBC Radio 4

    Shadow chief secretary to the Treasury, Chris Leslie, accepts that incomes have improved for some, but not most people: "The Chancellor has got a plan which is very much focussed on that trickle-down philosophy lavishing tax cuts on those at the top - and the people at the top are doing very well. It's the question about 90% of the rest of the country - what is happening to them? And for them life is getting much harder."

     
  9.  
    09:57: Market update

    Here are the market numbers. London's FTSE 100 is down 0.12% at 6,880.78. Frankfurt's Dax is down 0.41% at 11,234.49 and Paris's Cac 40 is up 0.05% at 4,871.87. The pound is down 0.13% against the dollar at $1.5344 and is up 0.28% at 1.3783. Ho hum.

     
  10.  
    09:48: Eurozone economy

    More good news. The January services PMI for the 19-country eurozone, which is up one point to 53.7 - but a touch under the flash reading of 53.9. "The outlook has brightened for all countries," says Chris Williamson, chief economist at Markit.

     
  11.  
    Via Twitter James Landale Deputy political editor

    Big question: is UK win at ECJ against eurozone land grab a one off or proof that UK can win EU reform battles? @BBCJLandale

     
  12.  
    09:26: Euro ruling
    Euro notes

    Good news for the City after the General Court of the European Union ruled that the European Central Bank was wrong to insist that euro clearing houses be based in the eurozone. Britain had challenged the policy, saying it went against the bloc's single market.

     
  13.  
    09:16: Economy CBI Radio 5 live

    John Cridland the CBI chief got in a couple of requests for George Osborne via Wake Up to Money: "Lower taxes on business because if you give business money they can create more jobs. But we need to invest in childcare support for low paid families. The cost of childcare is holding them back from taking jobs."

     
  14.  
    09:02: Household incomes BBC Radio 4

    Chancellor George Osborne, has been talking to the BBC: "The picture you hear, particularly from my political opponents, of the British economy, is not one reflected in this independent report. Indeed quite the opposite - what they show is that Britain is growing, that incomes are rising, that the richest have made the biggest contribution, that inequality has fallen."

     
  15.  
    08:48: Standard Chartered
    Standard Chartered

    No great surprise, perhaps, that outgoing Standard Chartered chief executive Peter Sands - and three other directors - have decided not to take a bonus for last year considering that the bank's pre-tax profits fell by a quarter to $5.1bn (£3.3bn). With a touch of understatement, chairman Sir John Peace says: "2014 was a challenging year and our performance was disappointing."

     
  16.  
    08:35: Household incomes

    More on that research suggesting living standards in the UK have now returned to levels last seen before the financial crash. The IFS says incomes are now rising at more than 1% a year. Its director, Paul Johnson, says there is not much to trumpet about: "It's astonishing actually that seven years later incomes are still no higher than they were pre-recession and indeed for working-age households they're still a bit below where they were pre-recession."

     
  17.  
    08:23: BlackBerry BBC World News

    Technology correspondent Rory Cellan-Jones has been speaking to John Chen, the boss of BlackBerry, on World Business Report. Rory asks him if he can imagine company no longer making handsets: "It's a little bit of speculation at the moment. I would say this: for our shareholders, nothing is sacred." Perhaps sales volumes speak louder than words.

     
  18.  
    Via Twitter Adam Parsons Business Correspondent

    So what does @jimmy_wales consider "an abomination"? And what does @CBItweets want from the Chancellor? Click here to listen to today's Wake Up to Money. @AdamParsons1

     
  19.  
    08:07: Eurostar sale BBC Radio 4
    Eurostar

    Sim Harris, managing editor of Rail News, tells Today that Britain's 40% stake in Eurostar went for a higher than expected £757m because there was a lack of high quality assets available to investors. He adds: "Whether it's the right thing to do is a question for George Osborne."

     
  20.  
    07:55: Legal and General results

    The insurer Legal & General said operating profits rose 10% last year to a lower than expected £1.28bn. Company pension deals helped sales of annuities to jump 28% to £44bn.

     
  21.  
    07:44: Greggs results

    Greggs has been freshening up its stores over the past year. It refitted 213 shops, opened 50 new outlets and closed 71 to bring the total to 1,650 shops as of 3 January.

     
  22.  
    Via Twitter Kamal Ahmed BBC Business editor

    Forget the IFS, the Pasty Index is in - Greggs sales up 4.5%, always a good barometer of consumer confidence. @bbckamal

     
  23.  
    Via Twitter Robert Peston Economics editor

    tweets: "Living standards back to where they were in 2007-8, but mainly for those over 60. & are rising strongly now, says IFS "

     
  24.  
    07:17: ITV results
    ITV

    ITV plans to return £250m to shareholders with a special dividend of 6.25p a share after a bumper 2014, with adjusted pre-tax profits up 23% to £712m and 39% higher at £605m on the pure pre-tax measure. Revenue rose 7% to a shade under £3bn. "ITV is now a high-growth business," says chief executive Adam Crozier.

     
  25.  
    07:06: Eurostar sale BBC Radio 4
    Eurostar

    Gemma Godfrey, head of investment strategy at Brooks Macdonald Asset Management, tells Today that the £757m the Government got for the Eurostar stake was higher than expected, but questions what the proceeds be used to fund. She believes the cash should be used to fund the next generation of infrastructure that will in turn create profits for the public purse.

     
  26.  
    07:00: Greggs results
    Greggs shop

    Greggs results hit the desk. Total sales rose 5.5% to £804m, while like-for-like sales up 4.5% - much better than the 0.8% fall in 2013.

     
  27.  
    06:49: ITV results BBC Radio 4
    Downton cast

    ITV reports annual results very soon. Toby Syfret of Enders Analysis has told Today that while channel brands have become less important than they were in the past, the decline is gradual. Programming - such as Downton Abbey - remains the crucial factor. "Good content is going to be the core of whoever is successful in the future," he says.

     
  28.  
    Via Twitter Sally Bundock Presenter, World Business Report

    tweets: "Morning. #Ukraine hikes interest rates to 30%. Plus GDP slows in #Australia and an i/v with the boss of #Blackberry. See you soon." That's on World Business Report.

     
  29.  
    06:26: Household incomes

    Big discussion about the Institute for Fiscal Studies (IFS) report on household incomes. Whether the average household income is back to levels they were at before the financial downturn struck. One measure, for the over 60s, it is. But for most of the rest of us, it hasn't got there yet. Our story here.

     
  30.  
    06:15: India rates

    India has cut its main lending rate by a quarter of a point to 7.5% in a bid to boost economic growth. It is the second time this year that the Reserve Bank of India has cut rates as inflation is running at 5.1% - well under the 8% target - on the back of cheaper oil.

     
  31.  
    06:12: Sandwiches Radio 5 live
    UK map of bread names

    Greggs figures are out in an hour or so. The market is looking for 4% growth, earnings are expected to be up 9%. The UK is estimated to spend £9bn a year on sandwiches. Wake Up to Money has been discussing what these are variously called around the country. There's a map illustrating this.

     
  32.  
    06:07: Eurostar sale

    The stake is being bought by a Canadian pension fund and a UK asset manager will buy shares for £585m and Eurostar will also hand over £170m to redeem shares which guarantee a dividend. The stake was officially valued last year at £325m.

     
  33.  
    06:02: Eurostar sale Radio 5 live

    The sale by the Government of its shares in Eurostar for £750m is under discussion on Wake Up to Money. Gemma Godfrey head of investment strategy at wealth manager Brooks MacDonald tells the programme: "After the debacle we saw when they were selling Royal Mail they had to get it right and the value has come in above expectations."

     
  34.  
    06:00: Rebecca Marston Business reporter, BBC News

    Good morning. Strap in and sit back. Today's Business Live page will have all the news, all day. Greggs and ITV results are expected to be early highlights.

     

Features

From BBC Capital

Programmes

  • Kinetic sculpture violinClick Watch

    The "kinetic sculpture" that can replicate digital files and play them on a violin

Try our new site and tell us what you think. Learn more
Take me there

Copyright © 2015 BBC. The BBC is not responsible for the content of external sites. Read more.

This page is best viewed in an up-to-date web browser with style sheets (CSS) enabled. While you will be able to view the content of this page in your current browser, you will not be able to get the full visual experience. Please consider upgrading your browser software or enabling style sheets (CSS) if you are able to do so.