Russia halts gas supplies to Ukraine

Gas giant Gazprom said on Wednesday it was halting all natural gas supplies to Ukraine after pricing talks broke down in the latest row between Russia and its war-torn ex-Soviet neighbour.

"Ukraine did not pay for July gas supplies," Gazprom said.

"Gazprom halted gas supplies to Ukraine from 10 am (0700 GMT) July 1," it said in a statement, stressing that no more gas would be sent to the pro-Western country without prepayment.

The announcement came after Ukraine declared Tuesday it was suspending all purchases of natural gas from Russia after EU-mediated negotiations in Vienna aimed at keeping supplies running broke down.

Ukraine's state energy company Naftogaz indicated that gas supplies to Europe would not be affected, saying it would continue transporting Russian gas supplies westward to its other European clients.

Moscow dramatically hiked the price it charges Ukraine following the ouster of Kremlin-backed leader Viktor Yanukovych in February 2014.

Kiev is now increasingly relying on supplies from central European countries and energy-rich Norway.

Russia had offered to keep the price it charges Ukraine through the end of September at $247 per thousand cubic metres of gas.

That figure represents a $40 discount from the price Russia had the right to set under the terms of a prior agreement.

But Russian Energy Minister Alexander Novak said Ukraine wanted a discount of at least 30 percent.

End-of-year haggling over energy prices has been a familiar problem between Russia and Ukraine, with Moscow having cut natural gas to Ukraine and disrupted transit supplies to Europe in the past.

Ties collapsed after a popular uprising in Kiev last year ousted Kremlin-backed leader Yanukovych, and Russia moved to wrest the Crimea peninsula from Kiev's control and buttressed Russian-speaking separatists in the east of the country.

Analysts at VTB Capital suggested that Ukraine, which needs to refill its underground storage facilities ahead of winter, could eventually renew gas purchases from Russia.

"In the meantime, Ukraine is to make use of reverse gas purchases, although in our view they are unlikely to be any cheaper," the bank said in a note to clients.
Source: AFP