Ukraine threatens to take Russia to court over gas

Ukraine on Saturday rejected Russia's latest gas price hike andthreatened to take its energy-rich neighbour to arbitration court over a dispute thatcould imperil deliveries to western Europe.Prime Minister Asreniy Yatsenyuk said Russia's two rate increases in three days werea form of "economic aggression" aimed at punishing Ukraine's new leaders foroverthrowing a Moscow-backed regime last month.Russia's natural gas giant Gazprom this week raised the price of Ukrainian gas by 81percent -- to $485.50 (354.30 euros) from $268.50 for 1,000 cubic metres -- and nowrequires the ex-Soviet nation to pay the highest rate of any of its European clients.The decision threatens to further fan a furious diplomatic row over Ukraine's futurebetween Moscow and the West that has left Kremlin insiders facing sanctions andstanding more diplomatically isolated than at any stage since the 1989 fall of theBerlin Wall."Political pressure is unacceptable. And we do not accept the price of $500 (per 1,000cubic metres of gas)," Yatsenyuk told a meeting to top ministers called to get ahandle on the economic crisis that threatens to further escalate tensions in theculturally splintered nation of 46 million."Russia was unable to seize Ukraine by means of military aggression. Now, they areimplementing plans to seize Ukraine through economic aggression." Yatsenyuk said Ukraine was ready to continue purchasing Russian gas at the oldrate of $268.50 because this was "an acceptable price".But he added that Ukraine must prepare for the possibility that "Russia will eitherlimit or halt deliveries of gas to Ukraine" in the coming weeks or months.Gazprom's western European clients saw their deliveries limited in 2006 and 2010when the energy giant -- long accused of raising the rates of neighbours who seekcloser ties to the West -- halted supplies to Ukraine due to disagreements over price.Gazprom's gas meets about a third of EU nations' demand despite efforts by Brusselsto limit energy dependence on Russia amid its crackdown on domestic dissent andincreasingly militant foreign stance.Nearly 40 percent of that gas flows through Ukraine while the remainder travelsalong 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 readyto take Gazprom to arbitration court in Stockholm if Moscow refused to negotiateover a lower price."I have firmly said that we are going to try to reach an agreement," Prodan said."But if we fail to agree, we are going to go to arbitration court, as the currentcontract allows us to do," he added. "There is still time to agree with Russia."- 'Political weapon' -The budding gas war adds another layer of tensions to a crisis that has seen Russiamass tens of thousands of troops along Ukraine's eastern border after annexing itsBlack Sea peninsula of Crimea last month.The Unites States has responded by boosting NATO's defence of ex-Soviet andeastern European nations and trying to isolate Russian President Vladimir Putin onthe world stage.US Vice President Joe Biden vowed on Friday to work with Ukraine and other allies toprevent Russia from using energy as a "political weapon".Yatsenyuk said Saturday he was trying to seal agreements with Ukraine's westernneighbours on gas deliveries that would cost about $150 per thousand cubic metresless than the price charged by Gazprom.Ukraine has already received small quantities of gas from Poland and Hungarydespite the displeasure voiced over such shipments by Russia.Yatsenyuk said he was also keen to secure an agreement of Slovakia -- a country thatreceives all its gas from Russia and has been unwilling to complicate relations withGazprom in the past.He added that Ukraine's energy minister would hold talks Tuesday in Brussels aboutso-called "reverse flow" deliveries of gas to Ukraine."We need specifics from our European partners," said Yantsenyuk. "This concernsdecisions on reverse flow shipments and this concerns decisions on thediversification of supplies."Gazprom chief Alexei Miller warned Saturday that Russia would be looking carefullyat any independent deals its client states reached with Ukraine."A pipeline cannot work in forward and reverse flow regimes at the same time,"Miller told Russian state television."European companies that are ready to provide reverse flow deliveries to Ukraineshould take a very careful -- very careful -- look at the legitimacy of such sorts ofoperations," the head of Gazprom said.