Ukraine Crisis: Gazprom Eyes Gas Price Hike Over Lack of Ukrainian Payments

Russia's state-run energy giant Gazprom says it is mulling over whether to increase gas prices after the first quarter of this year because of a lack of payments from Ukraine.

According to a statement by Gazprom's chief financial officer, Gazprom is looking to hike prices for Ukraine, despite Vladimir Putin previously pledging to potentially lower gas bills in the event of a new government.

"The situation with payments is worrying. Ukraine is paying but not as well as we would like it to ... We are still thinking about whether to extend the pricing contract into the next quarter based on current prices," said Andrei Kruglov.

On 21 February, Gazprom has quelled market concerns over the impact the Ukrainian crisis has on European gas exports after declaring that the Russian state-owned energy giant has "pumped [gas] in full volumes" through its pipeline via the embattled country.

In late January, Russian President Putin said his country will wait until Ukraine forms a new government before fulfilling promises to lower natural gas prices and loan $15bn (£9bn, €11bn) to Ukraine.

The hike in gas prices for Ukraine will add pain to the country which has dwindling currency reserves and is desperate for emergency cash from Russia and the International Monetary Fund.

Meanwhile, since Gazprom pushes 40% of its exports through Ukraine, market participants have waited in anticipation for news over potential supply disruptions.

Nearly a third of all European gas imports come from Russia and the UK heavy relies on the country and Qatar for its gas needs.

Meanwhile, Ukraine imports three-fourths of its oil and natural gas usage and all of its nuclear fuel, mainly from Russia.

The Ukrainian energy sector has many troubles, including lack of investment, deferred maintenance in aging infrastructure, poor reliability and quality of energy supply, and problems maintaining security.

In the past decade, Ukraine has negotiated deals with Russia to keep its domestic gas prices at world levels, but recently, Russia grown publically weary of Ukraine's political instability.