Moscow raises temperature of energy supply row with Ukraine

Disruption to EU supply feared if Russian payment demands lead to ‘gas war’


Russia says it will take measures against Ukraine unless it urgently settles a €640 million energy bill, fuelling fears that the neighbours may engage in the type of winter "gas war" that has previously disrupted supply to EU states.

The row comes as Moscow seeks to persuade Kiev not to sign landmark trade and political deals next month with the European Union, fearing they would align Ukraine's future with the West rather than with traditional partner Russia.

"This is a dire state of affairs," said Alexei Miller, chief executive of Russia's gas export monopoly, Gazprom, adding he was "extremely concerned" by the outstanding sum of $882 million (€640 million).

"The situation with Ukraine's gas payments is coming to a head. Ukraine has failed to pay fully for August supply," Mr Miller added.

'Not critical'
In Kiev, Ukrainian prime minister Mykola Azarov said the dispute was a matter for the relevant gas companies, not governments, to sort out and, while saying that "there are problems", said they could "hardly be called critical".

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Meeting Mr Miller in Moscow, however, Russian premier Dmitry Medvedev countered: "I believe that there are payment problems – and they are critical."

He also said it was “fully possible” that Russia would have to implement Mr Miller’s suggestion that Ukraine be forced to pay in advance for its gas – a heavy burden for the country’s struggling economy.

“Now we need to wait for the response of our Ukrainian partners and, depending what that it is, take the appropriate course of action,” said Mr Medvedev. “If there is no response, then we will have to go to pre-payment.”

Russia and Ukraine waged two “gas wars” over price disputes in the winters of 2006 and 2009, with Moscow halting deliveries to Ukraine and reducing supply to several EU countries. About a fifth of the gas used in the EU comes from Russia via Ukraine.

Moscow is frequently accused of using its energy riches to put political pressure on its neighbours, and while it gives discounts on fuel to former Soviet states that toe the Kremlin line, it charges far higher prices to countries with which relations are more strained – including Ukraine.

Kremlin spokesman Dmitry Peskov said the debt dispute had nothing to do with Russian anger over Ukraine's intention to tighten links with the EU.

“This is not a political matter, but purely an economic- commercial one,” he said.

“Gazprom has waited long enough, shown flexibility for a long time . . . but this flexibility cannot be limitless.”