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President Barack Obama waves as he boards Air Force One en route to the Netherlands, at Andrews Air Force Base, Md., March 23, 2014. As Russia consolidated its hold on Crimea, Obama and several allies are preparing to meet in The Hague in an effort to develop a strong, united response despite their diverging interests in dealing with the Kremlin.

Doug Mills, Nyt - Nyt

Russians squeeze Ukraine economically

  • Article by: ANDREW E. KRAMER 
  • New York Times
  • March 23, 2014 - 11:12 PM

KIEV, Ukraine – Russia and Russian state companies have increased the economic pressure on the new pro-Western government in Kiev over the past week, closing the border to most trucks, shutting a Ukrainian factory in Russia and yet again raising the price of natural gas.
The actions revive an array of Russian economic foreign policy tools used for years
and made possible by Russia’s robust domestic consumer market and the country’s energy exports.
About a quarter of Ukraine’s exports go to Russia, and factories here have benefited from a growing demand in the defense sector and rising consumer purchasing power.
Russia’s manipulation of gas prices under various pretexts has for a decade proved to be a particular headache for pro-Western Ukrainian governments.
Russia is now asking close to $500 for 1,000 cubic meters of gas, the standard unit for gas trade in Europe, which is a price about a third higher than what Russia’s gas company, Gazprom, charges clients elsewhere.
Russia says the increase is justified because it seized control of the Crimean Peninsula, where its Black Sea naval fleet is stationed, ending the need to pay rent for the Sevastopol base. The base rent had been paid in the form of a $100 per 1,000 cubic meter discount on natural gas for Ukraine’s national energy company, Naftogaz.
Under an agreement signed in 2010 by Dmitry Medvedev, then Russia’s president and now the prime minister, the Russians lowered the price of gas in exchange for an extension of the base’s lease, effective for at least 25 years.
On Thursday, Medvedev said the discount was no longer warranted because Russia considered the entire Crimean Peninsula, including the base, to be its territory.
Ukraine’s prime minister, Arseniy Yatsenyuk, called the revocation of the gas discount particularly unfair because the Russian government, a majority shareholder of Gazprom, had annexed the territory that was now being used to justify the amendment of the commercial energy contract.
“Russia, because it committed armed robbery of Ukraine, and in this way in fact destroyed our bilateral agreement, wants to raise the price of gas for Ukraine,” Yatsenyuk told reporters in Kiev on Friday. But he said Naftogaz could not decline to buy gas from Russia, given the country’s dependence on the fuel.

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