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Russia cuts gas delivery price to Ukraine

This file photo shows pipelines at a Russian gas production center.

Russia has agreed to a discount in the price of natural gas for Ukraine in a bid to bring Russian gas prices closer to European market rates.

According to a notice by Russian Prime Minister Dmitry Medvedev, Moscow cut its previous gas price of $230 per 1,000 cubic meters (tcm) by $17.8, bringing it to $212.2 per tcm as of January 1.

“Russians understand that in order to be competitive they need to decrease the price,” Medvedev said, adding that the price reduction was intended to reflect “market conditions.”

Ukraine halted gas purchases from Russia’s top producer Gazprom in July 2015 after Kiev and Moscow failed to reach a deal on gas deliveries for the third quarter of the year. Kiev has since been importing gas via reverse flows from the EU, mainly from Slovakia.

Tensions between Russia, which is Europe's biggest gas supplier, and Ukraine, the main transit route to the European Union, have been high since Crimea voted to join Russia in March 2014.

Ukraine, which has around 5 bcm of gas in underground storage, needs to have stored 19 bcm of gas to protect its own supply in winter as well as to ensure there are no halt to the transit of Russian gas across the country to Europe.

The EU receives about 40% of its Russian gas imports via Ukraine.

Russia’s 2015 gas production reached 635.349 billion cubic meters (bcm), down 1.0% year-on-year.

In December alone, Russia produced 63.309 bcm of gas.


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