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Russian company ends Ukraine gas discount

MOSCOW/KIEV---Russian gas giant Gazprom on Tuesday announced it was ending a discount enjoyed by Kiev in a major blow for the Ukrainian economy, as Ukraine approved the holding of joint military exercises with NATO close to Russia's newly annexed region of Crimea.

Ukraine has reported a partial withdrawal of Russian troops from its eastern border, amid tentative signs of a calming in the worst East-West standoff since the Cold War. However NATO said it could not confirm the retreat.

Ukraine's parliament meanwhile met one of Moscow's key demands by voting unanimously to disarm all self-defense groups that sprang up across the country during its political crisis that first erupted over a ditched EU alliance in late November.

But tensions still remained high over two weeks after Moscow formally annexed Crimea, as NATO foreign ministers prepared to forge a response to Russia's intervention and emboldened foreign policy.

The crisis is at a critical juncture as Ukrainian politicians jockey for position ahead of May 25 presidential elections and tentative diplomacy gets under way between Moscow and the West to find common ground after the fall of president Viktor Yanukovych.

Gazprom Pressures Ukraine

With Moscow able to use gas as a lever to pressure Kiev, Gazprom chief executive Alexei Miller said Ukraine will now pay US$385.5 dollars per 1,000 cubic meters of gas from the previous cut rate of US$268.5.

“The discount will no longer apply,” he said in a statement. “This is due to the inability of the Ukrainian side to pay for debts from 2013 and realize full payments for current deliveries.”

The discount had been agreed between Yanukovych and President Vladimir Putin in December 2013 as a form of financial aid to the former regime.

The price hike — although widely expected — is a new blow to the Ukrainian economy that needs an international rescue to stave off the risk of default.

But meeting a key demand posed by both the West and Russia, Ukraine's parliament Tuesday voted to disarm all self-defense groups that had sprung up across the country during its political crisis.

“The Ukrainian people are demanding order,” acting president Oleksandr Turchynov said. “Those who carry arms — besides the police, the security services and the national guard — are saboteurs who are working against the country.”

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