Russia halts gas supply to Ukraine after pay dispute | News | DW | 01.07.2015
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Russia halts gas supply to Ukraine after pay dispute

Russian gas company Gazprom has halted all natural gas supplies to Ukraine after Kyiv failed to make an advanced payment for July. Kyiv revealed on Tuesday it would suspend Russian gas purchases.

In a statement released Wednesday, Gazprom said "Ukraine did not pay for July gas supplies," and as a result, the company would be "halt[ing] gas supplies to Ukraine from 10:00 am (0700 UTC) July 1."

The head of the Russian gas export company, Alexei Miller, told state media the shutoff was affected because Ukraine would not prepay for new supplies.

Without an advance payment Gazprom said "no more gas would be sent to the conflict-torn ex-Soviet country."

Russia reportedly offered to retain the same price for gas as during the second quarter of 2015 - $247.17 (221 euros) per thousand cubic meters of gas - an offer Ukraine failed to accept.

Moscow maintains the offer price is $40 below market rates.

Ukraine has said it will now exclusively buy gas from Slovakia.

Gazprom's opaque pricing

Russian and Ukrainian energy ministers failed to reach an agreement on Tuesday regarding future supplies.

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 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.

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

The breakdown in 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.

Gas deliveries from Gazprom to its clients in other European countries would continue despite the decision to stop buying gas of its own, Naftogaz said in its statement. 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.

jlw/kms (AFP,dpa, Reuters)

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