Ukraine's Russian gas supply may be cut off, with rebel areas exempt

Russia's Kremlin-controlled Gazprom said Thursday it would exempt gas supplies to rebel-held regions from its main contract with Ukrainian Naftogaz, days before Kyiv uses up gas volumes it has already paid for.

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The dispute flared up last week when Gazprom said it started direct gas supplies to the regions of eastern Ukraine held by pro-Moscow rebels. Gazprom said Naftogaz would have to pay for these supplies to the rebel-held areas.

"If no new funds are received from Kyiv, then naturally we cannot continue delivering gas to Ukraine," spokesman Sergei Kupriyanov said in televised remarks. He said that Ukraine had prepaid for Russian gas until the end of the week.

Kyiv had earlier accused Gazprom of reducing gas supplies to Ukraine.

When asked if Russia in theory would be ready to supply gas to east Ukraine free of charge, Kremlin spokesman Dmitry Peskov said: "I can not speak of supplies now. But of course, these issues would be urgently considered if needed."

Following a bruising dispute over prices and debt that raised fears of supply disruptions in Europe, Russia and Ukraine signed a deal in October requiring Kyiv to pay in advance for gas shipments.

President Vladimir Putin said on Wednesday that Russia would halt gas supplies to Ukraine if it did not receive advance payment, raising the possibility of onward deliveries to Europe being disrupted for the fourth time in a decade.

Europe received around 147 billion cubic metres of Russian gas last year — or around a third of its total needs — with roughly 40 per cent shipped via Ukraine.

The Gazprom spokesman said that Ukraine had only 206 million cubic metres left for which Kyiv had already paid.

Europe brokered deal

"With the current level of supplies, prepayments will be enough only up till the end of the week. If Kyiv doesn't make new payments, we, naturally, won't be able to continue supplying Ukraine with gas," he said.

Moscow cut off supplies to Kyiv last June and restored them only in December, after a European-brokered deal secured supplies through the winter.

Under the deal, Ukraine is required to pay in advance for gas. The so-called winter gas deal is due to expire at the end of next month, with Kyiv managing to reduce its dependence on direct Russian gas supplies over the last year.

Russia, Ukraine and the European Union will hold talks in Brussels on Monday to discuss problems with gas supplies to Ukraine, according to European Commission spokeswoman Anna-Kaisa Itkonen.

A Russian Energy Ministry official said earlier she was not able to confirm whether Moscow has agreed to take part in the meeting yet. "We are talking by phone at the moment," she said.