Ukraine threatens to take Russia to court over gas

KIEV (AFP) - Ukraine on Saturday said it rejected Russia's latest gas price hike and threatened to take its 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 US$485.50 (S$611) from US$268.50 for 1,000 cubic metres - and now requires the ex-Soviet state to pay the highest rate of any of its European clients.

"Political pressure is unacceptable. And we do not accept the price of US$500 (per 1,000 cubic metres of gas)," Yatsenyuk told a government meeting.

"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 to purchase gas from Russia at the old rate of US$268.50 because this was "an acceptable price".

But he added that Ukraine must be ready for the possibility that "Russia will either limit or halt deliveries of gas to Ukraine" over the raging gas dispute.

Gazprom's Western European clients saw their deliveries limited in 2006 and 2010 when the energy giant - long accused of being wielded as a political weapon by the Kremlin against uncooperative neighbours - halted supplies to Ukraine due to disagreements over price.

Russia's gas meets about a third of EU nations' demand.

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

Ukrainian Energy Minister Yuriy Prodan told the same meeting that Kiev was ready to take Gazprom to arbitration court in Stockholm if Moscow refused to negotiate over a lower price.

"I have firmly said that we are going to try to reach an agreement," said Prodan.

"But if we fail to agree, we are going to go to arbitration court, as the current contract allows us to do," he added. "There is still time to agree with Russia."