Ukraine's economy may shrink by 5 percent and inflation may more than double in 2006 if it has to pay the price Russia is demanding for its gas exports, a senior government official was quoted as saying on Tuesday according to Reuters. Anatoly Kinakh, secretary of the National Security and Defence Council, told Unian news agency a four-fold increase in prices would most hurt the country's south and eastern regions, Ukraine's industrial heartland of chemicals and steel output. Moscow is demanding an increase in the price Ukraine pays for its gas to $230 per 1,000 cubic metres from the current $50 price that is rooted in Soviet-era subsidies. "The proposed price is unacceptable for Ukraine because it will inevitably lead to a fall in Ukraine's social and economic development, particularly in the southern and eastern regions where the country's industrial potential is concentrated," Kinakh was quoted by Unian as saying. Kinakh, the former first deputy prime minister, is the second top official after President Viktor Yushchenko in a council which sets the country's political and economy strategy. He said thousands of jobs in the chemicals and steel sectors might be lost as Ukraine is one of Europe's largest gas consumers, requiring huge amounts of gas to pump its Soviet-era steel and chemicals industries. --more 21 27 Local Time 18 27 GMT
