Russia cuts Ukraine’s gas after talks fail
Russia has cut the flow of gas to Ukraine 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.
Kyiv 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 6am GMT (4pm AEST) – a move that effectively halts all shipments because Kyiv 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 $US4.5 billion ($A4.87 billion) lawsuit against Ukraine with an arbitration court in Stockholm.
Kyiv responded by lodging its own $US6.0-billion 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 de
cision 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.’
Ukraine receives half its gas from Russia and transports 15 per cent 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 European Commission said Oettinger had offered a compromise deal that would have seen Ukraine pay $US385 per 1000 cubic metres 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.