Russian gas giant Gazprom said on Friday it would cut supplies to its former Soviet neighbour the Ukraine by a quarter as of Monday, in the latest twist to a long-running dispute over debt payments.
Russian gas giant Gazprom decided to cut supplies to the neighbouring Ukraine after two days of talks between the two countries ended in failure, the company's spokesperson Sergei Kupriyanov said in a statement on Friday.
"Considering that the situation has reached a dead end, to guarantee its own economic interests, Gazprom will reduce its gas supplies to Ukrainian consumers by 25 percent on March 3 at 10:00 am (0700 GMT)," Kupriyanov said.
The European Commission and Gazprom's European partners, which receive a large part of their supplies though Ukraine's pipelines from Russia, have been informed of the situation, he added.
Kupriyanov later told the Interfax news agency that Gazprom was ready to continue talks with Ukrainian gas firm Naftogaz Ukraine but was unsure if the Ukrainian side would agree to negotiate.
The dispute is over 1.9 billion cubic meters of gas deliveries worth around 600 million dollars (395 million euros) that Ukraine has not paid, Kupriyanov said.
Despite the fact that Ukraine claims to have settled its debts for 2007, disagreements remain over a debt Moscow claims Ukraine accumulated in recent months when Russia used its own gas to make up for a shortfall in less expensive Central Asian gas.
Russian natural gas accounts for around a quarter of Ukraine's gas imports, with the rest coming from former Soviet republics in Central Asia via pipelines that go through Russia.
In Friday's statement, Kupriyanov complained that the "informal use of gas is continuing this year." Gazprom earlier complained that no documents had been signed for the gas provided to replace the Central Asian shortfall.
Kupriyanov also complained that Ukraine had failed to sign new deal to coordinate the two countries' gas relations.
Earlier this month., Russian President Vladimir Putin and his Ukrainian counterpart Viktor Yushchenko brokered an accord which had appeared to end the payment dispute.
Under the deal, Moscow agreed to a Ukrainian demand to replace two controversial intermediary gas trading companies with a more transparent firm.
Changes to the murky system of intermediaries by which Ukraine pays for gas imported from Russia and Central Asia had been a key demand by Ukrainian Prime Minister Yulia Tymoshenko.
The dispute echoes a price row that led to a brief cut-off of Russian gas to Ukraine in 2006, which in turn led to supply shortages in the European Union.
Gazprom has been criticized in the past for cutting supplies to neighbouring countries in pricing disputes that critics say are politically motivated.
Gazprom chairman Dmitry Medvedev, who is expected to replace president Vladimir Putin following Sunday's Presidential election, has defended the company's actions.
Earlier this month he said foreign clients should get used to paying Gazprom's rates since gas is not "a freebie that comes in pretty plastic pipes."
Date created : 2008-02-29