Russia halts gas supplies to Ukraine amid new spat

Moscow: Gas giant Gazprom said on Wednesday it was halting all natural gas supplies to Ukraine after pricing talks broke down in the latest row between Russia and its war-torn ex-Soviet neighbour.

"Ukraine did not pay for July gas supplies," Gazprom chief Alexei Miller said in a statement.

"Gazprom has halted gas supplies to Ukraine from 10 am (0700 GMT) July 1," he said.

He stressed that no more gas would be sent to the pro-Western country without prepayment no matter what the future price will be, adding that the gas pricing formula for Ukraine would not be changed until late 2019.

The Kremlin declined to comment.

The announcement came after Ukraine declared Tuesday it was suspending all purchases of natural gas from Russia after EU-mediated negotiations in Vienna aimed at keeping supplies running broke down.

Ukraine`s state energy company Naftogaz indicated that gas supplies to Europe would not be affected, saying it would continue transporting Russian gas supplies westward to its other European clients.

On Wednesday Ukraine`s energy minister Volodymyr Demchyshyn said Kiev was ready to continue talks.A senior European official said that gas supplies to Ukraine and the EU would not be endangered.

"Both gas deliveries to Ukraine and transit to the EU are not endangered," said Maros Sefcovic, the European Commission`s vice-president for energy union.

Russia supplies around a third of Europe`s gas, some half of it flowing via Ukraine.

Moscow dramatically hiked the price it charges Ukraine following the ouster of Kremlin-backed leader Viktor Yanukovych in February 2014.

Kiev is now increasingly relying on supplies from central European countries and energy-rich Norway.

On Wednesday, Ukrainian gas pipeline operator Ukrtransgaz spokesman Maksim Belyavsky confirmed transit gas supplies had not been affected.

Belyavsky said Ukrtransgaz had on Wednesday received only a request from domestic clients for gas that enters the ex-Soviet nation through western neighbour Slovakia.

According to Ukrtransgaz, over the past six months Ukraine has imported 6.3 billion cubic metres of gas from Europe and 3.7 billion cubic metres of gas from Russia.

Russia had offered to keep the price it charges Ukraine through the end of September at $247 per thousand cubic metres of gas.

That figure represents a $40 discount from the price Russia had the right to set under the terms of a prior agreement.

But Russian Energy Minister Alexander Novak said Ukraine wanted a discount of at least 30 percent.

End-of-year haggling over energy prices has been a familiar problem between Russia and Ukraine, with Moscow having cut natural gas to Ukraine and disrupted transit supplies to Europe in the past.

Ties collapsed after a popular uprising in Kiev last year ousted Kremlin-backed leader Yanukovych, and Russia moved to wrest the Crimea peninsula from Kiev`s control and buttressed Russian-speaking separatists in the east of the country.Officials in Moscow denied that the spat was politically motivated. 

"Gazprom has made this decision because Ukraine in an unreliable partner. Ukraine has to pay to receive Russian gas," Pavel Zavalny, head of the energy committee in parliament`s lower house, told AFP.

"What kind of politics can there be when Ukraine has no money? They have nothing to pay us with."

"We are talking about a new round of confrontation," Fyodor Lukyanov, the Kremlin-linked chairman of the Council on Foreign and Defence Policy, told AFP.

"If the conflict drags on then we will see Europe put pressure on both sides of the conflict so that they come to an agreement."

Analysts at VTB Capital suggested that Ukraine, which needs to refill its underground storage facilities ahead of the winter, could eventually renew gas purchases from Russia.

"In the meantime, Ukraine is to make use of reverse gas purchases, although in our view they are unlikely to be any cheaper," the bank said in a note to clients.

Volodymyr Saprykin, an energy expert in Kiev, admitted that getting through the winter without Russian natural gas would be problematic.

"Ukraine needs to pump 19 billion cubic metres of gas into storage facilities. But so far these plans are not being implemented," he told AFP.

Fears had swirled that the gas spat would affect electricity supplies in Crimea, which come from Ukraine, but the Russian energy ministry said on Wednesday power supplies had not been interrupted.