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KYIV, Ukarine (AFP) — Russia cut the flow of gas to Ukraine yesterday 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 0600 GMT — a move that effectively halts all shipments because Kyiv has not forwarded any money for future gas deliveries to Moscow.

Ukraine’s Prime Minister Arseniy Yatsenyuk called the measure “another stage of Russia’s aggression against the Ukrainian state”, while Washington urged Moscow to resume negotiations with Kyiv.

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.

Kyiv 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.

Gazprom chief Alexei Miller later told Russian television the firm may lodge a second lawsuit against Ukraine’s gas group Naftogaz seeking $18 billion in unpaid gas bills.

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.

Naftogaz said a delegation will travel today to Budapest to woo European firms into selling them gas, saying some offers have already come in.

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 Kyiv out of the Kremlin’s orbit for the first time.

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

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

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Russia turns off the gas

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