Russia prepares to cut Ukraine's gas after talks fail

Russia prepares to cut Ukraine's gas after talks fail
Ukrainian Energy Minister Prodan talks to journalists as he leaves after talks with members of the Russian delegation and EU Energy Commissioner Oettinger, in Kiev

MOSCOW - Europe faced gas supply disruptions Monday after Ukraine failed to broker an 11th-hour deal with Russia in a feud that has stoked the worst East-West crisis since the Cold War.

Ukraine hosted the last-gasp talks hoping to keep an energy shortage from compounding the new pro-Western leaders' problems as they confront a two-month separatist insurgency threatening the very survival of their ex-Soviet state.

But Russia's state gas firm Gazprom said it had switched Ukraine to a pre-payment system at 0600 GMT - a move that effectively halts all shipments because Kiev has not forwarded any money for future gas deliveries to Moscow.

"If we receive no pre-payment by 10:00 am (0600 GMT), then we obviously will deliver no gas," official Gazprom spokesman Sergei Kuprianov told AFP.

Gazprom added in a statement issued once the deadline had passed that "according to (our) provisional invoice, no payments for June were received." Russia's Deputy Prime Minister Arkady Dvorkovich said Moscow would decide its next step after Gazprom chief Alexei Miller briefs President Vladimir Putin and the government about the negotiations later Monday.

Gazprom added that it had notified Europe of possible gas disruption and has now lodged a $4.5 billion (S$5.6 billion) lawsuit against Ukraine with an arbitration court in Stockholm.

Ukrainian Energy Minister Yuriy Prodan said Kiev would now try to secure greater gas deliveries from its western European neighbours to make up for the lost Russian supplies.

'Ukrainian side was ready'

The third "gas war" between Russia and Ukraine since 2006 flared when Moscow nearly doubled its rates in the wake of a deadly winter uprising that pulled Kiev out of the Kremlin's historic orbit for the first time.

Ukraine receives half its gas from Russia and transports 15 per cent of the fuel consumed in Europe - a reality that prompted EU Energy Commissioner Guenther Oettinger to urgently step in and try to break up the feud.

Kiev said it was ready to make a $1.95 billion (1.45 billion euro) payment demanded by Moscow if Russia agreed to cut its ongoing rate to $326 from $485.50 for 1,000 cubic metres of gas.

But Putin had insisted that $385 per 1,000 cubic metres was his final offer.

The European Commission said Oettinger had offered a compromise that would see Kiev pay $1 billion Monday and the rest of the debt in instalments stretching through the end of the year.

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