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Ukraine stops buying Russian gas

July 1, 2015

Ukraine has said it will halt gas purchases from Russia after energy officials from the two countries failed to agree on new prices. Kyiv's state energy firm has said gas will continue flowing to other European states.

A Gazprom employee works at the gas measuring station Photo: EPA/MAXIM SHIPENKOV +++(c) dpa - Bildfunk+++
Image: picture-alliance/dpa/M. Shipenkov

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.

"Since the additional agreement between Naftogaz and Gazprom is expiring on June 30, and the terms of further Russian gas deliveries to Ukraine were not agreed at today's trilateral talks in Vienna, Naftogaz is suspending purchases from the Russian company," the Ukrainian firm said in a statement.

Ukraine and Russia's bargaining stances "are still far apart," according to European Commission Vice President Maros Sefcovic. He added 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 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.

sms/jr (AFP, dpa, Reuters)