Russian gas company Gazprom halted supplies to neighbouring Ukraine yesterday after the collapse of pricing talks.
Gazprom chief executive Alexei Miller said that Russia halted the supply at 10am because Ukraine didn’t make an advance payment for July’s delivery.
He said: “Gazprom is not going to send gas to Ukraine at any price without the advance payment.”.
The move comes a day after Ukraine’s state energy firm Naftogaz announced it was suspending gas purchases from Russia.
Naftogaz said on Tuesday: “Since the additional agreement between Naftogaz and Gazprom is expiring on 30 June, 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 it would continue transporting Russian gas supplies to other European customers.
Russian and Ukrainian energy ministers have failed to reach an agreement on future supplies. Russia offered Ukraine a price of $247 per cubic metre, a $40 discount. However, Ukraine was looking for a $100 discount.
Russian energy minister Alexander Novak insisted that the discount that Ukraine is asking for is “unjustified” and would put the cost of supplying Ukraine below the market rate.
Ukrainian officials did not immediately comment yesterday on Gazprom’s decision.
But Ukrainian energy minister Volodymyr Demchyshyn said on Tuesday that a discount offered by Russia wasn’t enough and that Ukraine will buy gas from other nations – starting yesterday – until an agreement is reached with Russia. Gas consumption is low at this time of year, allowing Ukraine to bargain for better terms.
Ukraine said it has found cheaper supplies from other European nations which resell the gas they get from Russia. Moscow has described these “reverse supplies” as illegal.
Ukraine imported a third of its total gas supplies from Russia in the first six months of the year, the national pipeline operator said yesterday.
Pricing disputes between Russia and Ukraine in the past have led to gas wars, leaving other European nations without energy for heating in winter.
It is the second time in a year that Russian fuel supplies have stopped running to Ukraine.
Russia cut off gas supplies in June 2014 as the conflict between the government in Kiev and pro-Russian rebels in the east of Ukraine escalated.
It also hiked prices after Ukraine’s Kremlin-backed leader Viktor Yanukovych was ousted in February 2014.
For the past year, the European Union, which mediated at the price negotiations in Vienna, has forged a series of temporary agreements that need to be renewed every three months.
The last deal that Russia and Ukraine signed in October offered Kiev a discount, but required it to pay in advance for gas shipments.
Ukraine – which is struggling to balance its budget amid protracted fighting against Russia-backed separatists in the east of the country – relies heavily on gas supplies for its metals and machinery industries.