Ukraine Could Face Hike Of More Than 40 Percent In Gas Prices Next Year

KIEV, Ukraine -- Ukraine's government is preparing for a more than 40 percent hike in gas prices next year, even as Moscow and Kyiv hold talks aiming at averting another pricing dispute and supply disruptions, an official said Tuesday.

The government is anticipating an increase from $95 per 1,000 cubic meters to $135 - a 42 percent hike, said Vitaly Lukyanchenko, spokesman for Ukraine's first deputy prime minister, Mykola Azarov.

Ukraine had hoped to retain the $95 price - already a twofold increase over last year - for five years, but that looked less likely after Prime Minister Viktor Yanukovych, perceived as more pro-Russian than the Westward-leaning officials who ran the previous government, called recent price talks with Moscow "rather difficult."

Talks have been ongoing since Yanukovych took office earlier this month.

But "we are taking as the basis an optimistic scenario for the development of events," Azarov told Profil magazine in an interview published Monday.

He said Ukraine would be able to handle any jump in prices since the Cabinet was amassing a Hr 3 billion ($598 million) stabilization fund in case of such an event.

Ukraine's fuel and energy minister, Yuriy Boyko, said Tuesday that Ukraine would ensure that western European gas consumers do not suffer supply disruptions as they did in January during a price dispute between Ukraine and Russia, when Russia briefly turned off the gas taps.

Russia then accused Ukraine of siphoning off gas meant for Europe. Ukraine is the main transit country for Russian gas heading to Western Europe.

"European consumers and Russian resource owners won't have any surprises," Boyko said.

Boyko said Ukraine was "on schedule" with its efforts to store gas for the coming winter, rejecting European concerns that the country is falling behind.

Meanwhile, Gaz Ukrainy, a daughter company of Ukraine's state-owned gas company Naftogaz, began switching off the gas supply Tuesday to the Ukrainian capital's main hot water supplier, Kyivenergo, said Oleksiy Tkach, a Gaz Ukrainy spokesman.

As of Tuesday, Kyivenergo owed more than Hr 66 million ($13.7 million dollars) for gas used this year. The increase in the price of imported gas has prompted Ukrainian gas companies to take a harder line with debtors.

Ukraine is one of the world's most inefficient users of natural gas, with many factories and municipal suppliers using outdated equipment that makes little use of energy-saving technology.

Source: AP