Ukraine and Russia in gas ‘crunch’ talks

Final talks on gas dispute set to start, with fuel supplies to Europe to start dwindling by Wednesday if unresolved.

Russian gas giant Gazprom has warned it may halt shipments to Ukraine on June 3 unless its bills are paid [AFP]

Ukraine and Russia are to enter crunch talks on Monday to settle a long-running dispute over the price of gas deliveries.

Ukraine’s third “gas war” with Russia in less than a decade erupted when Moscow – stunned by the sudden ouster of an ally who had just rejected a European Union alliance that the Kremlin greatly feared – nearly doubled the price it charges its neighbour for the fuel.

Kiev accused Moscow of “economic aggression” and refused to cover a bill that Russia puts at $5.17bn.

Russian gas transits through Ukraine supply about 15 percent of European needs and a top EU envoy is now urgently seeking a compromise that could save 18 member states from seeing their deliveries start dwindling from Wednesday.

A final round of talks was set for Monday in Brussels after Ukraine’s Naftogaz state energy firm – bowing to both EU and Kremlin pressure – transferred a $786 million payment to its Russian counterpart Gazprom to keep the talks alive.

Gazprom now says it is willing to discuss a lower price and analysts believe that a compromise is in sight because Russia would prefer to avoid complicating its relations with Europe further.

Ukrainian Prime Minister Arseniy Yatsenyuk added to the general positivity surrounding Monday’s meeting by promising to settle Russia’s entire bill using part of a new Western financial rescue package.

“We will pay our bills,” Yatsenyuk told German public television in an interview aired on Sunday.

“First we have to sign a (new price) contract. And then, 10 days later, Ukraine will pay.”

But Yatsenyuk also warned that Ukraine would follow the example of other Gazprom clients who had won their own price disputes through the courts by filing for arbitration in Stockholm by the end of Monday if no agreement was reached.

Source: AFP