Kiev: Ukrainian Prime Minister Arseniy Yatsenyuk on Tuesday rejected Russia`s demand for Kiev to pay upfront for all its natural gas deliveries starting in June because of billions of dollars in debts.
Yatsenyuk said in a letter addressed to EU leaders and posted on the government website "that the issue of pre-payments cannot feature on the negotiating agenda" with Russia.
Russia`s state gas giant Gazprom warned last week it may halt shipments to Ukraine on June 3 in a repeat of previous energy wars that also limited supplies to nearly 20 nations in western and southern Europe.
Nearly 15 per cent of all gas consumed in Europe is delivered from Russia via the ex-Soviet state.
Gazprom puts Ukraine`s June bill at USD 1.66 billion. It had previously said that Kiev`s state energy company had also accumulated USD 3.51 billion in debt.
Ukraine had refused to make the payment in protest at Russia`s decision to nearly double the rate it charges its neighbour for gas following the February ouster of Kiev`s pro-Kremlin regime.
Russia`s energy minister appeared to make a partial concession on Friday by saying Moscow was ready to negotiate a lower gas price should Ukraine use its new IMF rescue package to cover USD 2.24 billion it owed through April 1.
But Yatsenyuk said Ukraine was instead more interested in securing gas shipments from other European nations and seeing Western investors upgrade its outdated gas transport network.
"Should the Russian Federation refuse to resolve this dispute," he said Ukraine would file a lawsuit with a European arbitration court in Stockholm.
The danger for EU nations is that Ukraine -- its state coffers effectively empty and almost completely reliant on YSD 17 billion promised by the International Monetary Fund -- will not cover its debt and instead start taking the gas Russia had earmarked for its European clients.
The nation of 46 million people began dipping into supplies meant for Europe when it was cut off from Russian gas during previous price disputes in 2006 and 2009.
Kiev and Moscow had earlier agreed to hold a second round of negotiations with EU energy officials on May 26.