Russia threatens to cut off Ukraine's gas after talks fail

A picture taken on May 21, 2014, shows outdoor reservoirs and pipelines at the Bilche-Volytsko-Uherske underground gas storage facility, the largest in Europe, not far from the village of Bilche village, in the Lviv region of western Ukraine. -- PHOT
A picture taken on May 21, 2014, shows outdoor reservoirs and pipelines at the Bilche-Volytsko-Uherske underground gas storage facility, the largest in Europe, not far from the village of Bilche village, in the Lviv region of western Ukraine. -- PHOTO: AFP

KIEV (AFP) - Russia threatened to cut off Ukraine's gas on Monday after the two sides failed to strike a deal that would have saved Europe from supply disruptions, stoking the worst East-West crisis since the Cold War.

Ukraine hosted the last-gasp talks hoping to avoid an energy crisis compounding the new pro-Western leaders' problems as they confront a two-month separatist insurgency threatening the very survival of their ex-Soviet state.

But a top official from Russia's state gas firm Gazprom told AFP that the EU-brokered talks that stretched through the night had failed to bridge the two sides' acrimonious disagreement over price and how much debt Kiev exactly owed Moscow.

"We reached no agreement and the chances that we will meet again are slim - we are already on the plane heading back (to Moscow)," official Gazprom the Russian gas company's official spokesman Sergei Kuprianov said by telephone.

"If we receive no pre-payment by 10:00 am (2 pm, Singapore time), then we obviously will deliver no gas."

An EU source told AFP that the 28-nation bloc "tabled a compromise proposal (package)" submitted by EU Energy Commissioner Guenther Oettinger in a bid to broker an interim solution.

The third "gas war" between Russia and Ukraine since 2006 flared when Moscow nearly doubled its rates in the wake of a deadly winter uprising that pulled Kiev out of the Kremlin's historic orbit.

Ukraine receives half its gas supplies from Russia and transports 15 per cent of the fuel consumed in Europe - a reality that prompted Mr Oettinger to urgently step in and try to break up the feud.

Kiev said heading into the negotiations that it was ready to make a US$1.95 billion (S$2.4 billion) payment demanded by Moscow if Russia agreed to cut its ongoing price to US$326 from US$485.50 for 1,000 cubic metres of gas.

But Russian President Vladimir Putin said US$385 per 1,000 cubic metres was his final offer and threatened to turn off Ukraine's taps if no payment was made by early Monday.

'THEY WANT BLOOD'

The gas talks were further clouded by a new diplomatic feud that exploded after Ukraine's acting foreign minister called Mr Putin "a prick" while trying to restrain protesters who attacked Moscow's embassy compound in Kiev on Saturday.

Nationalists with signs reading "Kremlin - hands off Ukraine!" tore down the embassy's Russian tricolour while others smashed its windows and overturned diplomats' cars.

Ukraine's new leaders and their Western allies accuse Russia of supplying rocket launchers and even tanks to the insurgents in a bid to break up its western neighbour following the February ouster of a pro-Kremlin regime.

"They wanted to see blood spilt," Russian Foreign Minister Sergei Lavrov claimed on Sunday.

The embassy protest came in response to the deaths of 49 servicemen killed on Saturday when pro-Kremlin rebels downed their military transport plane with weapons Kiev believes were supplied by Moscow.

The loss of life was the biggest suffered by Ukrainian forces in their escalating two-month push to reclaim control of separatist areas of the industrial east.

RARE US REBUKE TO KIEV

Ukraine's newly-elected President Petro Poroshenko tapped into the fury provoked by Saturday's plane downing near the eastern city of Lugansk by vowing to deal the insurgents "an adequate response".

His comments were soon followed by what appeared to be a spontaneous protest outside the gated Russian embassy compound in Kiev that soon turned violent.

The overnight protest only ended after one young man threw a Molotov cocktail that was quickly extinguished.

About a dozen police officers looked on without intervening before leaving the scene.

Washington delivered Kiev a rare rebuke by urging "authorities to meet their Vienna Convention obligations to provide adequate security".

Kiev police Sunday arrested three people accused of inciting the embassy violence.

'HE CAN'T CONTROL HIMSELF'

Acting Foreign Minister Andriy Deshchytsya put himself in the crosshairs of the diplomatic spat by being filmed being telling protesters "Putin is a prick" in a bid to calm the seething crowd.

The insult has become something of a catchphrase for pro-Kiev Ukrainians after it was chanted by thousands of local football fans at a match.

But Mr Deshchytsya's comments became headline news in Russia and the anger among senior Moscow figures was palpable.

Mr Deshchytsya "allowed himself to make comments that cross all lines of decency," Mr Lavrov said. "I do not know how we are going to work with him from now on."

Kiev media speculate that Mr Deshchytsya's days as Ukraine's top diplomat may indeed be numbered because Mr Poroshenko intends to name his own close associate to the post in the coming days.