• Oettinger in Kiev at 2am local time on Monday said talks had broken down (Photo: ec.europa.eu)

Russia to stop gas to Ukraine, rejects EU proposal

16.06.14 @ 09:28

  1. By Andrew Rettman
  2. Andrew email

BRUSSELS - Russian firm Gazprom is stopping gas supplies to Ukraine after talks on a new price broke down in the small hours of Monday (16 June).

It said in a statement published at 10am Moscow time – its deadline for Ukraine to pay almost $2 billion of old debt – that it is switching to "prepayment for gas supplies … Starting today, the Ukrainian company will only get the Russian gas it has paid for".

It added that Ukraine has not made prepayments for June.

The situation does not mean immediate shortages for Ukraine or for EU countries which get Russian gas via Ukraine because Ukraine has large volumes in its storage vaults and demand is low in summer.

But unless the dispute is resolved, it could lead to the kind of winter crunch which saw power outages in Europe in 2009.

The high-level talks in Kiev on Sunday, which involved EU energy commissioner Gunther Oettinger, ended when Russia rejected an EU compromise proposal.

The commission suggested Ukraine pays $1 billion of its debt now and the rest in six tranches by the end of the year, in part using money from EU and International Monetary Fund assistance.

It also suggested Ukraine in future pays a price of $385 per thousand cubic metres in winter and $300 in summer. But Russia said it would not go lower than $385 overall.

"The Ukrainian side was ready to accept this, but for the moment the Russian partners were not," the EU said in a statement. "The commission is convinced that a solution is still possible and … will reflect on the next steps and on when to bring the parties together again."

The $385 is close to average European market rates. But it is higher than the $268.5 price offered by Russia to Ukraine's ousted leader Viktor Yanukovych last year as an incentive to abandon EU integration.

The gas talks are taking place in a volatile atmosphere.

Ukrainian leader Petro Poroshenko in a phonecall with French President Francois Hollande on Saturday urged the EU to impose economic sanctions on Russia.

His appeal came after pro-Russia rebels shot down a Ukrainian military plane killing 49 servicemen.

The EU and US have threatened to take the step unless Russia de-escalates the conflict in east Ukraine by the end of the month, when the EU and Ukraine plan to sign a free trade treaty.

EU Council chief Herman Van Rompuy in a statement also on Saturday did not mention sanctions.

But he said: "There is … no doubt that the armed fighters that are terrorising and disrupting the lives of citizens in Ukraine, are enjoying external support, including arms supply and reinforcement through foreign fighters."

"Russia bears a primary responsibility in ensuring that any such traffic and external support through its borders is immediately stopped."

The death of the 49 Ukrainian soldiers prompted violence outside the Russian embassy in Kiev on Saturday.

A crowd of some 200 people threw paint, eggs, and stones at the building. A Russian flag was ripped up and cars overturned.

Ukraine's acting foreign minister, Andriy Deshchytsia, went to the scene to urge people to protest in a peaceful way.

He said, according to Reuters, that: "We must fulfil our international obligations, including defending the right of Russia to have an embassy in Ukraine." He then added: "Did I say that I am against you protesting? I am for you protesting. I am ready to be here with you and say 'Russia, get out of Ukraine' … Yes, Putin is a dickhead, yes."

His jibe saw some Russian MPs call for his dismissal, while Russian foreign minister Sergei Lavrov told Russian media: "I don't know how he will talk to us and work with us now."

The US also "condemned" the stone throwing against the Russian embassy.