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Tags: Ukraine | Russia | Gazprom

Russia Cuts Ukraine's Gas After Talks Fail

Russia Cuts Ukraine's Gas After Talks Fail
RussianPrime Minister Dmitry Medvedev, right, confers with gas giant Gazprom CEO Alexei Miller on June 16.

Monday, 16 June 2014 11:35 AM EDT

Russia cut the flow of gas to Ukraine on Monday after last-ditch talks failed to resolve a price dispute that threatens to disrupt supplies to Europe for the third time in a decade.

Ukraine hosted the EU-mediated negotiations hoping to keep an energy shortage from compounding the problems of its new pro-Western leaders as they confront a two-month eastern insurgency threatening the very survival of the ex-Soviet state.

Kiev was dealt a further blow when dozens of Kalashnikov-wielding pro-Russian militia seized the central bank in the economically vital separatist stronghold city of Donetsk in a bid to win control over the industrial region's assets.

Russia's state gas giant 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.

Prime Minister Arseniy Yatsenyuk called the measure "another stage of Russia's aggression against the Ukrainian state".

Gazprom said it had further notified Europe of possible gas disruptions and lodged a $4.5-billion (3.3-billion-euro) lawsuit against Ukraine with an arbitration court in Stockholm.

Kiev responded by lodging its own $6.0-billion (4.4-billion-euro) suit against Gazprom with the same Stockholm court to recover past "overpayment" for gas.

Analysts said Ukraine had been urgently filling up its gas storage tanks in anticipation of Russia's decision and that no disruptions to Europe were likely until the winter heating season begins.

"The authorities estimate they have sufficient reserves to last until the end of this year," London's Capital Economics consultancy said.

"For or precisely the same reasons, western Europe is less vulnerable to knock-on disruptions to its gas supplies."

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 percent of the fuel consumed in Europe — a reality that prompted EU Energy Commissioner Guenther Oettinger to urgently step in to try to resolve the feud.

The nation of 46 million people had tapped into some Russian shipments destined for Europe to make up for its shortfalls during previous disputes.

Ukrainian Energy Minister Yuriy Prodan promised on Monday to both "guaranteed the gas needs of Ukrainian consumers and ensure reliable gas transits to European countries".

Oettinger conceded in Vienna that Europe "would have a problem with a cold winter" if Ukraine ran out of storage supplies.

The European Commission said Oettinger had offered a compromise deal that would have seen Ukraine pay $385 per 1,000 cubic meters of gas — the price proposed by Russian President Vladimir Putin — in the winter and see its rate drop to $300 "or a few dollars more" during summer months.

"The Ukrainian side was ready to accept this, but for the moment the Russian partners were not," the European Commission said in a statement.

The raid by pro-Russian militias on the central bank building in Donetsk threatened to deprive Kiev of effective control over the economically vital industrial region's finances.

"We have been preparing this for more than a month," a rebel named Oleksandr Matyushyn told AFP as five separatist gunmen stood guard at its main entrance and bank staff filed out of the building.

"We want the tax revenues to stay here instead of going to Kiev," he added.

The Ukrainian government's press service said the raid had already halted the payment of pensions, social benefits and salaries to state employees.

Donetsk and the neighboring heavily Russified region of Lugansk declared independence in disputed May 11 referendums whose legitimacy was rejected by Kiev and the West.

The escalating campaign by Ukraine government forces to regain control over the region of seven million people has now claimed the lives of more than 370 civilians and fighters on both sides.

The head of Ukraine's national security and defense council estimated on Monday that the two regions had a combined force of 15,000 to 20,000 armed militants.

"According to field reports, half of these men came from the Russian Federation," Andriy Parubiy told reporters.

"Some of them are Chechens from (north) Caucasus and others are Russian special forces," he said.

Putin rejects charges of illicitly supplying the insurgents with rocket launchers and even tanks in a bid to assert Russia's control over southeastern Ukraine.

© AFP 2023

Russia's state gas giant 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.
Ukraine, Russia, Gazprom
Monday, 16 June 2014 11:35 AM
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