KIEV, Nov. 20 – Russia’s natural gas giant Gazprom, in a special statement, said Thursday it may hike natural gas prices for Ukraine by 122% to more than $400 per 1,000 cubic meters in 2009.

The hike, which represents increase in gas prices to levels that Ukraine can hardly afford, sent shockwaves throughout the country as many officials still hope the price would not exceed $250/1,000 cu m.

“We’re shocked,” a senior official at Naftogaz said Thursday. “There is no logical explanation. This price [$400/1,000 cu m] is nothing what we have been so far talking about.”

Gazprom’s announcement came hours after Russian President Dmitry Medvedev had urged the Russian company to force Ukraine to pay its gas debts, which he estimated at $2.4 billion.

Gazprom’s tone in the statement suggests a dispute or even confrontation may emerge between Russia and Ukraine before the end of the year that may result in disrupted gas supplies to Europe.

Ukraine is a major route for Russian gas exports to Europe and the cut in supplies to Ukraine automatically affects other countries, including Germany and France, that rely on Russian gas.

Gazprom and Naftogaz have been holding talks over 2009 gas prices and supply volumes since April, and Prime Minister Yulia Tymoshenko said the agreement was likely to be signed before the end of November.

Tymoshenko, following her talks with Russian Prime Minister Vladimir Putin earlier this year, said she had managed to negotiate a three-year period for gradual transition to market-based gas prices for Ukraine.

Ukraine usually pays a fraction of a market-based gas price as its inefficient steel-making technology and equipment require more gas compared with their modern counterparts in Europe.

Gazprom’s announcement comes as a shock as it completely undermines comments made by Ukrainian officials in the course of the Gazprom-Naftogaz talks.

For example, Energy and Fuel Minister Yuriy Prodan said 10 days ago that Ukraine may be able to secure even better-than-expected prices for Russian gas supplies next year due to falling crude oil prices.

Crude oil prices, which are used in Europe to calculate prices for natural gas to be charged by Gazprom, fell more than 66% since their peak in the middle of July.

Oil prices dropped to below $50 per barrel on Thursday, down from $147 per barrel in the middle of July, as demand had declined to growing concerns over global economic growth next year.

Back in July, Russian Foreign Minister Sergey Lavrov warned that Russia may hike gas prices to $400 per 1,000 cu m in 2009, up from $179.5/1,000 cu m in 2008, while oil prices continued to decline persistently since then.

The Tymoshenko government anticipated gas prices at $250 per 1,000 cu m in 2009, according to figures disclosed in the draft 2009 budget submitted to Parliament earlier this year. Any increase above that level would require the government to make additional spending to help compensate high gas pries for residential users.

Gazprom’s price announcement is also in sharp contrast with forecasts made by other companies heavily involved in gas sector.

Yuriy Boyko, a former energy and fuel minister that is close to Dmytro Firtash, a co-owner of RosUkrEnergo, the only gas supplier to Ukraine, said recently that declining oil prices means that Ukraine may keep paying $179.5/1,000 cu m in 2009.

Tymoshenko pledged to remove RosUkrEnergo as Ukraine’s key gas supplier in 2009, and said all gas next year will be delivered by Gazprom.

Alexei Miller, the CEO of Gazprom, met Medvedev on Thursday to complain that Ukraine has been making slow progress in clearing natural gas debts that had accumulated over the past two years.

“As of today, the issue of debt has not been settled,” Miller told Medvedev, according to the Kremlin report. “The sum is simply astronomical - $2.4 billion. We currently see no progress in the talks with Ukrainian counterpart in getting this money anytime soon.”

Responding to the complaint, Medvedev has urged Miller and Gazprom to make sure the debt is paid “either voluntarily or by force.”

Meanwhile, Naftogaz on Thursday questioned the amount it owes RosUkrEnergo.

“Today the debt, including all aspects, is $1.26 billion to $1.27 billion,” Volodymyr Trykolych, deputy head of Naftogaz, said. “This year we buy gas only from RosUkrEnergo, that’s why we do not have any debts owed to Gazprom.”

President Viktor Yushchenko on November 10 accused Tymoshenko of lack of progress in the talks with Russia over the 2009 gas supply and price agreement. Yushchenko also accused Tymoshenko of failing to stick to his instructions at the talks.

Oleh Dubyna, the head of Naftogaz, the next day traveled to Moscow for a meeting with Miller, and had later reported that Gazprom had agreed to supply at least 55 billion cu m of gas to Ukraine, enough to meet domestic demand. (tl/ez)