Ukraine faces the threat of Russia cutting off gas supplies when a 06:00 GMT deadline passes on Monday after talks on a long-running gas pricing dispute failed.
Russian natural gas producer Gazprom said it was not extending the deadline for Ukraine to start paying off its gas debts after the discussions ended in the early hours of the morning in Kiev, raising the prospect of disruptions to gas flows to the European Union via Ukraine.
The breakdown of the talks is likely to increase political tensions that have mounted in the past few days between Kiev and Moscow as Ukrainian government forces clashed heavily with pro-Russian separatists in east Ukraine.
Reuters news agency reported that the latest in several rounds of talks ended at around 1:30am (22:30 GMT) despite a last-minute attempt by the EU’s energy commission to secure a compromise.
Moscow says Ukraine has a total of more than $4bn in gas debts and wants almost half that sum paid by 06:00 GMT.
“The Russian side is expecting payment of the accumulated gas debt of $1.951bn before 10am [06:00 GMT] on June 16,” Gazprom spokesman Sergei Kupriyanov said.
“If the funds are not paid, gas supplies will, as was announced earlier, be switched to a pre-payment system.”
European Energy Commissioner Guenther Oettinger told reporters in Kiev that he had made a compromise proposal during the talks, which resumed late on Sunday, but Moscow had declined the offer.
Meanwhile, Ukrainian state gas company Naftogaz said it had filed a lawsuit at the Stockholm arbitration court to try to recover $6bn in what it said were overpayments to Gazprom.
Earlier, Gazprom said it filed a case at the same institution to try to recover Ukraine’s $4.5bn debt for gas.
The impact of gas supply cuts would not initially be huge because it is summer and Ukraine and the EU have enough gas in storage to cope, but each would fear cuts in the winter.
Western countries had seen the talks as a gauge of President Vladimir Putin’s willingness to compromise in Russia’s political crisis with Ukraine, which has pushed relations with the West to their worst level since the Cold War ended.
But relations deteriorated further last week, with Kiev accusing Moscow of arming the separatists with tanks, protesters
attacking Russia’s embassy in Kiev and the rebels shooting down a military plane, killing all 49 personnel on board.
Tensions were already high following Russia’s annexation of Crimea after Moscow-leaning president Viktor Yanukovich was ousted and pro-Western leaders took over power.