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Russia stops gas to Ukraine

July 1, 2015

Russia's state-owned gas giant Gazprom has announced it has cut off supplies of natural gas to neighboring Ukraine. EU-brokered talks to settle a price dispute with the war-torn country failed on Tuesday.

Ukraine Gas Kompresserstation in Chervonodonetsk
Image: picture-alliance/dpa/S. Kozlov

"Gazprom halted gas supplies to Ukraine from 10 a.m. (0700 GMT) July 1," the state-owned Russian company said in a statement, stressing that deliveries would not be resumed before Kyiv agreed to make payments in advance.

The announcement came after officials from Ukraine, Russia and the European Commission could not reach an agreement on new prices for Russian gas deliveries to Ukraine during talks in Vienna on Tuesday.

Following the breakdown of the talks, Ukraine's national gas supplier Naftogaz said it was suspending purchases since a previous agreement with Gazprom was expiring on June 30.

Ukraine and Russia's bargaining stances "are still far apart," according to European Commission Vice President Maros Sefcovic. He said that the Commission would present plans to bring the two sides closer together to find an agreement before the start of winter.

Gazprom's opaque pricing

Russian Energy Minister Alexander Novak said failure to reach an agreement was "unfortunate."

"The Ukrainian side said it was not satisfied with the price discount being offered by the Russian Federation," Novak said, according to Moscow's state-run RIA Novosti news agency.

Gazprom uses complicated pricing formulas to determine export prices on a country-by-country basis. The process has come under fire by EU officials as well as several European gas firms. Moscow, however, denies using gas prices as a political weapon and has maintained that prices are determined by the global energy market.

A Gas Deal with Ukraine - Delivery from West to East

Ukraine saw a dramatic hike in Russian gas prices in February 2014 when popular protests in Kyiv ousted the Russia-friendly former President Viktor Yanukovych for a pro-European government. The ongoing war in eastern Ukraine has also greatly increased tension between Kyiv and Moscow despite the Kremlin's claims it is not aiding pro-Russian separatists.

Transit supplies safe

Meanwhile, the European Commission said deliveries of gas to clients in the European Union were not affected by Gazprom's move.

"Both gas deliveries to Ukraine and transit to the EU are not endangered," Maros Sefcovic, the European Commission's vice president said Wednesday.

EU members rely on Russia for roughly a third of their gas supplies with nearly 40 percent of that gas coming through pipelines in Ukraine.

The collapse of energy negotiations marks the second time in less than a year that Russian gas has stopped flowing to Ukraine. Kyiv has increasingly relied on gas supplies from European countries - gas that sometimes arrives in those countries from Russia. Moscow opposes the practice, saying the countries are not within their rights to transfer gas bought from Gazprom at long-term, discounted prices back to Ukraine.

uhe/bk (AFP, Reuters)