Ukraine rejects Russia Gazprom gas price hike

Valves of a gas pipe-line in a gas station not far from Kiev on 4 March 2014 Correspondents say the gas price rise could also affect supplies to Europe.

Ukraine has rejected moves by Russia to almost double the price of Russian gas supplies to the country and threatened legal action.

Ukraine's interim PM, Arseniy Yatsenyuk, said Moscow's hikes were a form of "economic aggression".

His energy minister said Ukraine would try to negotiate a gas deal, but warned that if talks failed Ukrainians should prepare for Russia to cut off supplies.

Moscow says the price change is due to Kiev's failure to pay its bills.

Russia's state-controlled company Gazprom has raised the cost of gas to Ukraine by 81% to $485.50 (£292.86, 354.33 euros) from $268.50 for 1,000 cubic metres.

The increase comes amid tense diplomatic relations following Moscow's annexation of the Crimean peninsula.

'Unacceptable'

Mr Yatsenyuk said Russia was trying to punish the new leaders in Kiev after last month's removal of the Moscow-backed government of President Viktor Yanukovych.

"Political pressure is unacceptable, and we are not accepting the price of $500," Mr Yatsenyuk told ministers on Saturday.

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

Russian natural gas monopoly giant Gazprom headquarters in Moscow, 03/01/06 Gazprom says Ukraine's gas debts to Russia stand at just over $1.7bn (£1.02bn)

The prime minister said the price Russia was demanding was the highest in Europe, and that Ukraine was prepared to continue to buy at the previous rate of $268.50.

Energy minister Yuriy Prodan said that if no deal was reached, Ukraine would take action at an arbitration court in Stockholm.

"We are not trying to break our contract but to set up a fair price," he said, adding that that Ukrainians should prepare for the possibility of supplies to be cut off.

The price increase could also affect gas supplies to Europe, as 40% of Russian gas to the continent travels through Ukraine, says the BBC's David Stern in Kiev.

Mr Prodan has said Ukraine would meet its commitments to supply gas to Europe no matter what happened.

'On the edge'

Gazprom says Ukraine's gas debts to Russia stand at just over $1.7bn (£1.02bn).

Russia has increasingly pressured Ukraine over its debts since the ousting of President Yanukovych in February. He was removed after months of pro-EU protests.

Ukraine's former Prime Minister Viktor Yanukovych Ukraine's former Prime Minister Viktor Yanukovych negotiated a discount of almost a third on Russian gas

The price increase marks the end of a discount Russia agreed to give Ukraine in December after talks between Russian President Vladimir Putin and Mr Yanukovych.

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

The IMF has made subsidy reform a condition of its deal worth as much as $18bn.

Mr Yatsenyuk earlier told parliament the country was "on the edge of economic and financial bankruptcy".

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