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. Last Updated: 07/27/2016

Ukraine Braces Itself for a 40% Hike in Gas Prices

KIEV -- Ukraine's government is preparing for a more than 40 percent hike in gas prices next year, as Moscow and Kiev hold talks aiming at averting another pricing dispute and supply disruptions, an official said Tuesday.

The government is anticipating an increase from $95 per 1,000 cubic meters to $135 -- a 42 percent hike, said Vitaly Lukyanchenko, spokesman for Ukrainian First Deputy Prime Minister Mykola Azarov.

Ukraine had hoped to retain the $95 price -- already a twofold increase over last year -- for five years, but that looked less likely after Ukrainian Prime Minister Viktor Yanukovych, perceived as more pro-Russian than the Westward-leaning officials who ran the previous government, called recent price talks with Moscow "rather difficult."

Talks have been under way since Yanukovych took office earlier this month.

But "we are taking an optimistic scenario as the basis for the development of events," Azarov told Profil magazine in an interview published Monday.

He said Ukraine would be able to handle any jump in prices since the Cabinet was amassing a 3 billion hryvna ($598 million) stabilization fund in case of such an event. Ukrainian Fuel and Energy Minister Yuriy Boyko said Tuesday that Ukraine would ensure that West European gas consumers did not suffer supply disruptions, as they did in January during a price dispute between Ukraine and Russia, when Russia briefly turned off the gas taps.

Russia had then accused Ukraine of siphoning off gas meant for Europe. Ukraine is the main transit country for Russian gas heading to Western Europe.

"European consumers and Russian resource owners won't have any surprises," Boyko said.

Boyko said Ukraine was "on schedule" with its efforts to store gas for the coming winter, rejecting European concerns that the country was falling behind.

Meanwhile, Gas Ukraine, a daughter company of Ukrainian state-owned gas company Naftogaz, began switching off the gas supply Tuesday to Kiev's main hot water supplier, Kievenergo, said Gas Ukraine spokesman Oleksiy Tkach.