Russia cuts off natural gas supplies to Ukraine

June 16, 2014: 7:06 AM ET
ukraine russia gas
HONG KONG (CNNMoney)

Russian state-owned gas firm Gazprom says it has cut off supplies to Ukraine after negotiators failed to resolve a payment dispute before a key deadline expired.

Representatives from Ukraine, Russia and the European Union held meetings over the weekend in an effort to avert the crisis, but no agreement was reached.

Gazprom said Monday that Ukraine's total debt is $4.5 billion. The state-owned gas firm will now only deliver gas that Ukraine has paid for in advance.

"At this moment no payments for old debt or June were paid," said Gazprom spokesman Sergey Kupriyanov. "All charts show zeroes."

Both sides said they have filed claims with an international arbitration court in Stockholm.

While Gazprom hiked the price it charges Ukraine by about 80% to $485.50 per thousand cubic meters of gas in April, some concessions have been offered during recent talks. Gazprom charged European countries an average of $377.50 per thousand cubic meters in 2013.

Related: Europe leans more heavily on Russian gas

The gas dispute between Moscow and Kiev has escalated as relations between the two countries have deteriorated.

Rising gas prices hurting Ukrainians

Europe and the U.S. have imposed sanctions on Russia for its annexation of Crimea, while analysts have accused Russia of using natural gas supplies as a political tool.

In recent weeks, violence has again flared in eastern Ukraine as government forces clashed with pro-Russian militants. The military conflict was clearly having an effect on gas negotiations.

"We will not subsidize Russian Gazprom," Ukrainian Prime Minister Arseniy Yatsenyuk said Monday. "Ukrainians will not take out of their pockets $5 billion annually for Russia to use this money to buy weapons, tanks and jets and bomb Ukrainian territories."

Related: Russia looks to Asia for trade cushion

Europe relies on Russia for more than 30% of its gas, and half of that is pumped through Ukraine. Analysts worry that a disruption in supplies to Ukraine could hurt European companies and households.

Kupriyanov said Monday that "gas designated for European consumers is flowing in full accordance with the contract's figures."

-- CNN's Matthew Chance and Radina Gigova contributed reporting.

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