Russia cuts gas supplies to Ukraine in major escalation of dispute

Russia cuts gas supplies to Ukraine in major escalation of dispute

PanARMENIAN.Net - Ukraine says Russia has cut off all gas supplies, in a major escalation of a dispute between the two nations, BBC News reported.

Russia's state-owned gas giant Gazprom said Ukraine had to pay upfront for its gas supplies, after Kyiv failed to settle its huge debt. Gazprom had asked Ukraine's state gas firm Naftogaz to pay $1.95bn of the $4.5bn it said it was owed. It said it would continue to supply gas to Europe, although Gazprom chief Alexei Miller warned there now were "significant" risks for gas transit to the EU via Ukraine.

Ukraine has enough reserves to last until December, according to Naftogaz.

Later, the White House urged Moscow to resume talks with Ukraine, saying an EU proposal that Kyiv pay $1bn on Monday, June 16 and the rest in instalments was a "reasonable compromise".

Russia-Ukraine ties remain tense since Moscow annexed Crimea in February. Kyiv says Moscow backs pro-Russian activists in the east of the country. Russia denies the charge.

On Monday, Gazprom said in a statement: "Today, from 10:00 Moscow time [06:00 GMT], Gazprom, according to the existing contract, moved Naftogaz to prepayment for gas supplies. "From today, the Ukrainian company will receive Russian natural gas only in the amounts it has paid for."

Moments later, both Gazprom and Naftogaz filed lawsuits against each other at the International Council Commercial Arbitration (ICCA) in Stockholm.

Gazprom said it wanted to recover $4.5bn from Naftogaz while Naftogaz said it was seeking to recover $6bn in "overpayment" for gas since 2010.

Russian Prime Minister Dmitry Medvedev said Ukraine's position "smacks of blackmail". Ukrainian Prime Minister Arseniy Yatseniuk accused Moscow of blocking the deal to cause supply problems in Ukraine in the winter.

The latest moves follow crisis talks between Ukraine, Russia and the EU in Kyiv over the weekend.

However, EU Energy Commissioner Guenther Oettinger said he was "not pessimistic" about a deal. In a surprise move, he also signalled that issues around Gazprom's proposed South Stream gas pipeline were not insurmountable.

The European Commission has said the pipeline - which would take gas directly to Europe bypassing Ukraine - may break EU competition rules, but on Monday Oettinger said: "South Stream is a project that we indeed accept."

Gazprom stressed it would continue to supply Europe with gas at "full volume". However, correspondents say EU member states could be affected. About 15% of the EU's gas supply is Russian gas piped through Ukraine.

Ukraine's discounted rate for gas - negotiated with former President Viktor Yanukovych - was axed in April after Moscow accused Kyiv of failing to pay its bills. Earlier this month, Gazprom gave Ukraine more time to settle its gas bill after receiving a part-payment of $786m.

Ukraine said it refused to clear its debts completely in protest at Gazprom's recent 80% price increase. Ukraine's gas bill was $268 per 1,000 cubic metres until April. The price is now $485.50.

Kyiv had earlier said it was ready to make the $1.95bn payment if Russia cut its price to $326. But Moscow said $385 was the final offer.

Addressing security chiefs, Ukrainian President Petro Poroshenko said he had set government forces the task of regaining full control of Ukraine's border with Russia this week. He said that once the frontier was secure, a ceasefire could be declared and efforts made to agree a detailed peace plan.

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