Russia cuts gas to Ukraine,

flows to EU threatened
KIEV/GORKI Russia Mon Jun 16, 2014
(Reuters) - Russia cut off gas to Ukraine on Monday in a
dispute over unpaid bills that could disrupt supplies to the rest of Europe and set back hopes for
peace in the former Soviet republic.
fter !eekend violence that included the loss of "# troops in the do!ning of a Ukrainian plane$
Russia said %iev missed a deadline for a &'.#( billion debt payment and it !ould no! only get
gas paid for in advance. )t insisted that Ukraine must also ensure that it lets Russian gas flo!
through its international pipelines to Mosco!*s clients in the European Union.
%iev and Mosco! blamed each other for the failure to agree overnight on the price of future
gas deliveries and refused to abandon !ell established positions+ Russia offering a discount and
Ukraine re,ecting that as a tool for political manipulation.
-he talks are bound up !ith the !orst crisis bet!een Russia and Ukraine since the Soviet
Union collapsed and rising tensions over Saturday*s shooting do!n of the aircraft by pro-
Russian separatists in the east$ an attack on the Russian embassy in %iev and .estern charges
that Russia is arming the rebels.
/-hanks to the unconstructive position of the Ukrainian government$ today a prepayment
system !as introduced$/ le0ei Miller$ the chief e0ecutive of Russian state e0porter 1a2prom$
told 3rime Minister 4mitry Medvedev during a sombre meeting at a government residence at
1orki$ outside Mosco!.
5e said Ukraine had /adopted a position that can only be called blackmail/$ adding+ /-hey
!anted an ultra-lo! price./
1a2prom had asked %iev to pay almost half of a total debt !hich Mosco! puts at more than &"
billion by Monday morning or face supply cuts and the prospect of paying up front. Ukrainian
3rime Minister rseny 6atseniuk accused Russia of deliberately blocking a deal to cause %iev
supply problems ne0t !inter$ !hen temperatures plunge and heating needs increase.
/7ut it is not about gas. )t is a general Russian plan to destroy Ukraine$/ 6atseniuk told a ne!s
conference in %iev. /)t is yet another step against the Ukrainian state and against Ukrainian
independence./
SU338)ES )9 S-:R1E
source at 1a2prom said supplies to Ukraine had been reduced as soon as the deadline passed
and Ukrainian Energy Minister 6uri 3rodan said the country !as receiving no gas.
Ukraine has almost '" billion cubic metres of gas in underground storage$ enough to meet its
needs until 4ecember$ the chief e0ecutive of state gas company 9aftoga2 said.
long-term reduction of supply could hit EU consumers$ !hich get about a third of their gas
needs from Russia$ around half of it through pipelines that cross Ukraine. Earlier price disputes
led to the *gas !ars* in ;<<= and ;<<#$ and Russian accusations Ukraine stole gas destined for
the rest of Europe.
/-he gas for European consumers is being delivered at full volume and 9aftoga2 Ukraine is
re>uired to transit it$/ 1a2prom spokesman Sergei %upriyanov told reporters.
EU Energy ?ommissioner 1uenther :ettinger$ !ho brokered the failed talks overnight$ said in
@ienna that the European Union might have a problem and urged Russia to reconsider a
compromise.
5e said he !as confident of gas supplies and also held out the prospect of further talks to solve
the ro!.
7ut !ith both sides filing la!suits at the Stockholm international commercial arbitration court
to try to recover billions each says they are o!ed$ any >uick agreement seems a !ay off.
Russian premier Medvedev said talks could start only !hen 9aftoga2 had paid its debt in full.
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Russian shares fell on the talks* collapse$ !hich is likely to increase tensions bet!een Mosco!
and the .est and could make it harder to arrange a truce in east Ukraine$ !here Ukrainian
troops are fighting pro-Russian rebels$ some of !hom !ant the region to be absorbed by
Russia$ as ?rimea !as in March.
t <#(< 1M-$ the dollar-denominated R-S inde0 had pared some of its losses and !as do!n
'.; percent at '$B(C points$ !hile the rouble-based M)?ED !as do!n <.( percent at '$"#B
points.
.estern countries sa! the talks as a gauge of Russian 3resident @ladimir 3utin*s !illingness to
compromise and had been looking for signs that he !as trying to avert the threat of the .est
adding to sanctions imposed after Russia sei2ed ?rimea.
-hat move came after Mosco!-leaning Ukrainian president @iktor 6anukovich !as ousted by
street protests in Aebruary and pro-.estern leaders took over po!er in %iev. Russia denounced
that as a .estern-backed fascist coup.
-ensions rose further at the !eekend. 3rotesters ripped up Russia*s flag outside Mosco!*s %iev
embassy after the loss of the military plane in the east. 9-: released satellite pictures that it
said raised suspicions about Russia*s role in moving military e>uipment into eastern Ukraine.
-he gas talks broke do!n in %iev in the early hours of Monday$ !ith the sides unable to reach
agreement on price and on changes to a ;<<# contract that locked Ukraine into paying the
highest price in Europe. %iev !ants to pay &;=C.(< per '$<<< cubic metres of gas - the price it
had been offered !hen 6anukovich !as in po!er. 7ut$ in a compromise last !eek$ it said it
!ould agree to pay &B;= for an interim period until a lasting deal !as reached.
Mosco! had sought to keep the price at the ;<<# contract level of &"C( per '$<<< cubic metres$
but had offered to !aive an e0port duty$ bringing do!n prices by about a fifth to &BC($ broadly
in line !ith !hat Russia charges other European states.
%iev says that !aiving the duty rather than agreeing a ne! contract price means Mosco! could
use the threat of cancelling the !aiver to keep Ukraine under its thumb.
:ettinger said Mosco! had declined a compromise proposal under !hich %iev !ould pay &'
billion immediately and then make monthly debt payments to 1a2prom. Ukraine !ould also
pay &BC( per '$<<< cubic metres in !inter and around &B<< in the summer months.
(dditional reporting by Maria %iselova and 4enis 3inchuk in Mosco! and Michael Shields in
@iennaE .riting by Eli2abeth 3iperE Editing by lastair Macdonald)