:00:00. > :00:16.financial news with Aaron Heslehurst in World Business Report.
:00:17. > :00:21.Gas warfare. Russia threatens to turn the taps off on Ukraine's gas
:00:22. > :00:24.supplies unless it pays a multi`billion dollar debt Plus,
:00:25. > :00:27.rekindling the spark, can a new government pull India out of its
:00:28. > :00:43.worst economic slowdown in a quarter of a century?
:00:44. > :00:51.Welcome to World Business Report. I'm Aaron Heslehurst. Let's take a
:00:52. > :00:55.look at the world of business and money and the big challenges facing
:00:56. > :01:01.India and the new government shortly. How about the stark
:01:02. > :01:07.reminder of the power Russia can wield through its vast gas reserves.
:01:08. > :01:10.Russia's state gas company Gazprom has told Ukraine it will cut off its
:01:11. > :01:16.gas supplies on Tuesday unless it pays billions of dollars it says is
:01:17. > :01:20.owed. Let me take a look and show you the numbers. Gazprom says that
:01:21. > :01:25.by the end of next week Ukraine will owe $5.2 billion. It's a figure Kiev
:01:26. > :01:29.disputes and can't afford to pay. It signed a contract back in 2007 that
:01:30. > :01:37.locked it into buying gas at $485 per thousand cubic metres. That's
:01:38. > :01:43.the highest price paid by any country in Europe. Russia slashed
:01:44. > :01:45.the price by almost half when Viktor Yanokovich, Ukraine's pro`Russian
:01:46. > :01:55.former president, rejected a trade deal with the EU last year. But when
:01:56. > :02:03.he was ousted in February, Russia tore up the deal, reinstating the
:02:04. > :02:11.original price. The EU is brokering talks in Berlin today between the
:02:12. > :02:14.two sides. It's also worried about the knock`on effect. Europe is still
:02:15. > :02:17.heavily reliant on Russian gas, and half of it still comes via Ukraine,
:02:18. > :02:20.making up about a sixth of Europe's total supplies. Chris Weafer is
:02:21. > :02:31.Senior Partner at Macro Advisory Limited and joins me from Moscow.
:02:32. > :02:35.Many people may be watching and thinking, Ukraine signed a
:02:36. > :02:43.contract, it signed a deal, it used the gas, it simply must pay. At its
:02:44. > :02:48.core, it is a dispute about an unpaid utility bill. It is highly
:02:49. > :02:56.politicised. It isn't as simple as that. The original contract that
:02:57. > :03:02.Ukraine signed was at $486. That was discounted by $100 per thousand
:03:03. > :03:08.cubic metres to pay for the lease of the Sebastopol naval base in Crimea.
:03:09. > :03:14.Now, Crimea is part of Russia, clearly that complicated the deal.
:03:15. > :03:18.Additionally, Ukraine says that it is most unfair to the original
:03:19. > :03:22.contract, which required it to buy a minimum volume of gas, which it
:03:23. > :03:28.doesn't need any more and won't need in future. It is committed to buying
:03:29. > :03:31.gas but it doesn't need it at a higher price and essentially,
:03:32. > :03:36.Ukraine is holding out to renegotiate a new gas contract. That
:03:37. > :03:41.is at the core of the dispute, rather than whether or not it should
:03:42. > :03:49.pay for the arrears. Ukraine did receive $15 billion from the IMF,
:03:50. > :03:53.the EU, US and others. What are we expecting to hear today? Do you
:03:54. > :03:57.think the deal, do you think they will stump up half what they open
:03:58. > :04:07.`` they owe? Ukraine has received just over 3 billion of that plus
:04:08. > :04:14.additional money from Europe. It has about $5.5 billion at its disposal.
:04:15. > :04:18.The EU and the Germans particularly are trying to broker a peace deal.
:04:19. > :04:26.They are pushing for Ukraine to pay about half of the amount it owes,
:04:27. > :04:29.about $2.5 billion and, in exchange, there will be an agreement to
:04:30. > :04:33.renegotiate the terms of the contract at the European average
:04:34. > :04:45.price of around $380 and perhaps the elimination of the mill and ``
:04:46. > :04:50.minimum cost. This is a test case as to whether or not we can expect that
:04:51. > :04:59.Matic relationship between Ukraine and Russia going forward. Should
:05:00. > :05:06.Europe be worried? Not for a few months. In summer there is a lot of
:05:07. > :05:13.gas in storage. If the gas is cut off, it could be a few weeks before
:05:14. > :05:25.we see an effect. At this stage, the signs are that disruption will be
:05:26. > :05:28.minimal. Thank you for joining us. To India now, where official growth
:05:29. > :05:30.figures may underline the challenges faced by the country's new
:05:31. > :05:33.government and PM Narendra Modi. They are likely to show India's
:05:34. > :05:37.stuck in its worst economic slowdown in a quarter of a century. Let's
:05:38. > :05:41.take a look at the numbers. India's economy is expected to have grown at
:05:42. > :05:46.an annual rate of 4.8% in the three months to March, barely up on the
:05:47. > :05:55.previous quarter. That would mean two years in a row of growth below
:05:56. > :06:03.5%, the worst run in 25 years. 5% growth might sound good if you are
:06:04. > :06:07.in Europe or the US. But ten million young Indians enter the workforce
:06:08. > :06:13.each year. At that rate, it simply can't create enough jobs. India need
:06:14. > :06:18.vast investment to improve its infrastructure. Political deadlock
:06:19. > :06:23.last year meant $105 billion worth of investment was put on hold. So,
:06:24. > :06:35.can Narendra Modi's government do what it takes? From Calcutta, Yogita
:06:36. > :06:41.Limaye reports. He is working on the only order they
:06:42. > :06:44.have here at the moment. This factory makes ovens and mixers to
:06:45. > :06:50.produce biscuits. There isn't much right news. Without demand from
:06:51. > :06:59.inside India, they are just about getting by on some small orders from
:07:00. > :07:02.abroad ``bright. 10% profit is very difficult because raw material
:07:03. > :07:11.prices have increased 60%. Labour costings have increased. They have
:07:12. > :07:16.doubled. The salary of my people, two years ago was different. It is
:07:17. > :07:22.double now. It has been the same story for manufacturers around
:07:23. > :07:26.India. They are all going through a slump that has been particularly bad
:07:27. > :07:30.over the past year. In the months running up to the election, things
:07:31. > :07:34.had virtually come to a standstill around the country. Businesses has
:07:35. > :07:39.stopped expanding and consumers had stopped buying. Everyone was waiting
:07:40. > :07:46.and watching to see what the result would be. Now, India has a new
:07:47. > :07:50.government. It is led by Noranda Modi, whose party swept elections
:07:51. > :07:56.with a strong majority. `` Narendra Modi. Their promises of speeding up
:07:57. > :08:01.growth makes many hopeful that the months ahead will be better. The
:08:02. > :08:07.first priority from the government and the expectation is that growth
:08:08. > :08:09.sees some revival. Investment projects that have been stuck
:08:10. > :08:15.because of lack of clearances, start to see a revival. The ease of doing
:08:16. > :08:21.business in India which has been slowing down, begins to pick up.
:08:22. > :08:25.They cannot afford to neglect inflation, especially over food
:08:26. > :08:30.prices, a main reason the last government was voted out. Rain this
:08:31. > :08:34.year is expected to be below normal, so the new government will
:08:35. > :08:44.need to strike the right balance between keeping the cost of living
:08:45. > :08:47.down and getting growth to pick up. To Japan, where there's been good
:08:48. > :08:50.and bad news in the Government's battle to boost the economy. Last
:08:51. > :08:53.month, consumer prices rose at an annual rate of 3.2%. That's the
:08:54. > :08:55.highest inflation since February 1991 and represents a strong
:08:56. > :08:59.recovery from a two`decade spiral of falling prices. The problem is,
:09:00. > :09:03.Japanese household spending fell sharply, by down by 4.6% in April, a
:09:04. > :09:16.figure that was much worse than expected. It seems shoppers are
:09:17. > :09:20.being deterred by higher prices after a big rise in sales taxes at
:09:21. > :09:22.the beginning of the month. Rupert Wingfield Hayes reports on the
:09:23. > :09:33.dilemma facing the Japanese government. The French bank, BMP,
:09:34. > :09:37.could have to pay $10 billion to settle a US probe into sanctions
:09:38. > :09:44.busting one of the largest fines ever imposed on a bank, according to
:09:45. > :09:46.two separate reports. BNP is facing allegations of violating sanctions
:09:47. > :09:49.against Iran, Sudan and other countries. Neither the bank nor the
:09:50. > :09:55.US Justice Department would comment on the reports when contacted by the
:09:56. > :10:01.BBC. You can follow me on Twitter. I will
:10:02. > :10:02.be back with Sally to look at the headlines from around the world
:10:03. > :10:19.shortly. Thank you Aaron. He will be back
:10:20. > :10:20.soon to look at the papers. The Childrens' charity The NSPCC
:10:21. > :10:22.says it's