Russia halts gas to Ukraine

Photo: Contributed - russia-insider.com

Russian gas company Gazprom halted supplies to neighbouring Ukraine on Wednesday after the collapse of pricing talks, company official said.

Gazprom CEO Alexei Miller said that Russia halted the supply at 10 a.m. because Ukraine didn't make an advance payment for July's delivery.

"Gazprom is not going to send gas to Ukraine at any price without the advance payment," Miller said in comments carried by Russian news agencies.

Russian and Ukrainian energy ministers on Tuesday failed to reach an agreement on future supplies. Russia offered Ukraine a price of $247 per cubic meter, a $40 discount. Ukraine wanted a $100 discount.

Russian Energy Minister Alexander Novak insisted that the discount that Ukraine is asking for is "unjustified" and would put the cost of supplying Ukraine below the market rate.

Ukrainian officials didn't immediately comment on Wednesday about Gazprom's decision to halt supplies.

But Ukrainian Energy Minister Volodymyr Demchyshyn said Tuesday that a discount that Russia offered wasn't enough and that Ukraine will buy gas from other nations starting July 1 until an agreement is reached with Russia. Gas consumption is low at this time of year, allowing Ukraine to bargain for better terms.

Ukraine has said it has found cheaper supplies from other European nations which resell the gas they get from Russia. Moscow has described these so-called reverse supplies as illegal. Ukraine imported a third of its total gas supplies from Russia in the first six months of the year, the national pipeline operator said Wednesday.

Pricing disputes between Russia and Ukraine in the past have led to gas wars, leaving other European nations without heating in the dead of winter.

The last deal that Russia and Ukraine signed a deal in October offered Kyiv a discount, but required it to pay in advance for gas shipments.

Ukraine, which is struggling to balance its budget amid protracted fighting against Russia-backed separatists in the east, relies heavily on gas supplies for its metals and machinery industries.