Gas price for Ukraine to double next year

The gas price for Ukraine will almost double as a result of Russia switching to market pricing for Central Asian gas starting January 1, 2009, Russian Foreign Minister Serhey Lavrov said today, following a meeting between the Russian and Ukrainian presidents. According to Lavrov, Viktor Yushchenko assured Dmitry Medvedev that Ukraine is also interested in shifting to market prices as soon as possible. Vladimir Nesterenko: The announcement completely mimics our forecast back in March of this year, both in terms of the magnitude of the increase and the reasoning for it (see our report of March 12). Noteworthy, the news came on the back of Russia’s strengthening political pressure on Ukraine in regards to its NATO ambitions. One of the points in our report was that Ukraine could limit the increase if it softens its position on NATO accession. We still believe this could help, but the probability that Yushchenko sacrifices NATO to gas price discounts looks really small after this meeting.