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Published: Friday June 13, 2014 MYT 1:45:02 AM
Updated: Friday June 13, 2014 MYT 1:45:02 AM

Gazprom to halt gas to Ukraine if no payment by Monday

MOSCOW (Reuters) - Russian natural gas exporter Gazprom will halt supplies to Ukraine if it fails to pay off part of its gas debts by Monday, chief executive Alexei Miller said on Thursday, raising fears of disruptions in gas flows to Europe.

Miller said that if Ukraine failed to pay $1.95 billion (1.15 billion pounds) to Gazprom it would start requiring Kiev to pay in advance for further shipments, and that if it did not receive any money at all, it would cut off supplies.

A dispute over gas prices is central to Russia's crisis in relations with Ukraine, which has led to the worst standoff with the West since the end of the Cold War.

No agreement has been reached in several rounds of talks brokered by the European Commission. As the latest talks hit an impasse, Gazprom set June 16 as the deadline for Ukraine to pay off part of its debt.

"If Ukraine pays for no (gas) volumes at all, it means that ... gas shipments to Ukraine will be zero," Miller said in televised comments.

Moscow says Ukraine has piled up more than $4 billion in debts to Gazprom, which also delivers gas to the EU, half of it through pipelines that cross Ukraine.

Russia almost doubled the gas price for Ukraine to $485 per 1,000 cubic metres from April 1 after Ukraine's Moscow-leaning president was toppled in February.

Ukraine wants Moscow to stick to the price of $268.5 agreed for Kiev at the end of last year after ousted President Viktor Yanukovich ditched plans to forge closer ties with the EU.

Moscow has offered to cut it to $385 by eliminating an export duty of $100 per 1,000 cubic metres. This would be in line with the last year's average price for Russian gas in Europe of $387.

OTHER ROUTES

Russia supplied the EU and Turkey with 162 billion cubic metres (bcm) of gas last year, a record high, meeting around a third of gas demand in Europe. Around half of that went through Ukraine.

Russia's onward gas supplies to Europe through Ukraine were interrupted during the winters of 2006 and 2009 because of pricing spats with Kiev.

Miller said on Thursday Gazprom might boost gas supplies to Europe via other routes, including the Nord Stream pipeline through the Baltic Sea.

"We will do everything to provide uninterrupted gas supplies to European consumers," he said.

However, Russia's ability to ship gas via Nord Stream is limited because of EU regulations, which require third-parties to also be given access to pipelines.

Russia built Nord Stream with a capacity of 55 bcm a year to bypass transit countries, such as Ukraine. It plans to construct a South Stream pipeline on the bed of the Black Sea to Bulgaria and further up to Austria.

The European Commission has asked Sofia to suspend work on South Stream pending a decision on whether the project complies with EU law. Separately, Washington has warned that Bulgarian companies working on the project could be hit by sanctions.

Miller said Bulgaria had not notified Gazprom of any suspension of work on construction of the South Stream still under way.

(Editing by Timothy Heritage and Mark Potter)

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