Last updated: April 7, 2014 8:02 am

Stand-off over $2.2bn Ukraine gas bill

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Ukraine and Gazprom were locked in a tense stand-off over a $2.2bn gas bill, with a fresh payment deadline falling due on Monday, intensifying fears that the Russian energy giant would cut off supplies.

As the deadline for payment loomed, the two sides remained far apart over outstanding debts and a new pricing regime, with no fresh negotiations over the weekend. “There has been no progress,” said Sergei Kupriyanov, Gazprom’s spokesman in Kiev. “They are not paying anything, zero.”

Adding to tensions between Kiev and Moscow, authorities in the eastern city of Lugansk said on Monday that pro-Russian separatists who broke into the city’s security headquarters the previous day had seized weapons. Police have closed entrances to the city, news agencies said.

Pro-Russians also seized government buildings in the eastern cities of Donetsk and Kharkiv on Sunday. The interior ministry said on Monday that the protesters had been cleared from the Kharkiv buildings.

The Ukrainian government says it is willing to pay the $2.2bn bill, but reacted angrily to a move by Gazprom last week to raise the price it charges Ukraine from $268 per 1,000 cubic metres of gas to $485 and to claw back previous discounts.

“We cannot deliver gas for free, so they need to pay off the debt,” said Alexei Miller, Gazprom chief executive. “They also need to pay for 100 per cent of current supplies,” he said, adding that the situation “cannot continue indefinitely”.

Arseniy Yatseniuk, Ukraine’s prime minister, on Saturday accused Russia of following up on its annexation of Crimea with “a plan to pressure and grab Ukraine through gas and economic aggression”.

“We realise that the next step of Russia will be to limit supply of natural gas,” he said, recalling “the picture from 2006”, when Russia cut supplies.

Russia in 2009 halted gas transit through Ukraine amid a price dispute that caused serious disruptions in eastern European gas markets. During the first price dispute in 2006, Ukraine allegedly siphoned EU-bound gas for domestic needs after Russia sharply reduced transit flow. Russia supplies about 30 per cent of Europe’s natural gas, with almost half of it piped through Ukraine.

“We are shifting into higher gear towards another gas war,” said Valentyn Zemlyansky, a Ukrainian energy analyst.

However, a person close to Gazprom played down the risk of any interruption to gas supplies this week. Furthermore, the price of natural gas in Europe is at its lowest level since 2010, as warm weather and high storage levels curb demand for the fuel.

In depth

Crisis in Ukraine

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Russia has annexed the southern Ukrainian peninsula of Crimea, raising fears of a return to the politics of the cold war

Mr Yatseniuk called upon the EU to press Slovakia’s gas transit pipeline operator into allowing so-called reverse gas transit flow schemes, enabling Ukraine, which relies heavily on Russian fuel imports, to diversify by importing gas from the European market.

Russia annulled a 2010 agreement through which Kiev obtained a gas price reduction in return for prolonging its right to use a Crimean port as base for its Black Sea naval fleet.

Arsen Avakov, Ukraine’s interior minister, accused Russian president Vladimir Putin and Kiev’s recently ousted leader Viktor Yanukovich, who fled to Russia in February, of orchestrating the separatist upheaval.

“Putin and Yanukovich ordered and paid for the latest wave of separatist disorder in the east of the country. The people who have gathered are not many but they are very aggressive,” Mr Avakov said in a statement posted on his Facebook page.

Mr Avakov warned the separatists that they could face years in prison but pledged that law enforcement would do everything possible to re-establish order “without bloodshed”.

Additional reporting by Alex Barker in Brussels

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