Ukraine has decided to ban all Russian planes from using its airspace after exports of Russian gas to Ukraine have been halted by state-controlled giant Gazprom.
The decision was announced by Ukrainian PM Arseniy Yatsenyuk at a televised government meeting.
Gazprom said it had halted gas deliveries to Ukraine because it had used up all the gas it had paid for.
Ukraine said it had stopped buying from Gazprom because it could get cheaper gas from Europe.
The airspace ban applies to military planes as well as civil airliners.
PM Arseniy Yatsenyuk said: “The Ukrainian government has decided to ban all transit flights for all Russian airlines in Ukraine’s airspace.
“The government is instructing [aviation authority] Ukraerorukh, in line with the norms of international law, to inform the Russian Federation that Russian airlines and Russian aircraft do not have the right to use Ukraine’s airspace any longer.”
Following previous clashes over gas supplies, the two countries had agreed that Ukraine would pay for its gas in advance.
Gazprom CEO Alexei Miller said on November 25 that Ukraine had already used up all the gas it had paid for.
In a statement, Alexei Miller said that “deliveries have been stopped until the receipt of new payments from the Ukrainian company.
“The refusal to buy Russian gas will create serious risks for the reliable transit of gas to Europe through Ukraine and for the supply of gas to Ukrainian consumers during the upcoming winter,” he added.
However, Arseniy Yatsenyuk dismissed Alexei Miller’s comments out of hand.
The prime minister said his government had decided to stop buying gas from Russia as it could get a better deal elsewhere.
“The government has made the decision to order [Ukraine’s national oil and gas company] Naftohaz to stop buying Russian gas.
“They got it all wrong. It is not them who are not supplying gas to us, it is us who are not buying gas from them. This is being done because offers that have come from our European partners – price offers – are much better than the offers from our eastern neighbor.”
Russia cut off gas to Ukraine in June 2014 as the conflict between the government in Kiev and pro-Russian rebels in eastern Ukraine escalated.
However, it resumed them following the pre-payment deal.
About 15% of gas used in Europe travels through Ukraine. The EU has been holding talks aimed at keeping supplies running between the two sides.
Gazprom has reported a big drop in its annual profits after being hit by the fall in the value of the Russian currency.
Russia’s largest energy company reported a net profit of 159 billion rubles ($3.1 billion) for 2014, down 86% from a 1.14-trillion-ruble profit in 2013.
Last year’s fall in oil prices also contributed to the plunge in Gazprom’s profits.
At the same time, a debt and pricing dispute meant Gazprom cut gas supplies to Ukraine, one of its key markets.
Meanwhile, gas sales to Europe and other countries declined by 8.5%.
Russia has cut off all gas supplies to Kiev, in a major escalation of a dispute between the two nations, Ukrainian Energy Minister Yuri Prodan said.
“Gas supplies to Ukraine have been reduced to zero,” he said.
Russia’s state-owned gas giant Gazprom said Ukraine had to pay upfront for its gas supplies, after Kiev failed to settle its huge debt.
Gazprom had sought from Kiev $1.95 billion – out of $4.5 billion it says it is owed – by 06:00 GMT.
Russia has cut off all gas supplies to Kiev, in a major escalation of a dispute between the two nations
The Russian firm said it would continue to supply gas to Europe.
Russia-Ukraine ties remain tense since Moscow annexed Crimea in February.
Kiev says Moscow backs separatists in the east of the country. Russia denies the charge.
“Today, from 10:00 Moscow time, Gazprom, according to the existing contract, moved Naftogaz to prepayment for gas supplies,” Gazprom said in a statement on Monday morning.
“From today, the Ukrainian company will receive Russian natural gas only in the amounts it has paid for.”
Moments later, both Gazprom and Ukraine’s state-owned Naftogaz company filed lawsuits against each other in the Stockholm arbitration institute.
Gazprom said it wanted to recover $4.5 billion from Naftogaz, which is dealing with gas supplies to Ukraine. Meanwhile, Naftogaz said it was seeking to recover $6 billion in “overpayment” for gas since 2010.
Russian PM Dmitry Medvedev said Ukraine’s position on the issue “smacks of blackmail”.
The latest moves follow crisis talks between Ukraine, Russia and the EU on the issue.
“We reached no agreement. The chances that we meet again are slim,” Gazprom spokesman Sergei Kuprianov said after the latest round of the talks ended in Kiev over the weekend.
Russian state company Gazprom says Ukraine has to pay upfront for its gas supplies, after Kiev failed to settle its huge debt.
Gazprom had warned it would cut supplies if Ukraine failed to pay $1.95 billion – out of $4.5 billion it says it is owed – by 06:00 GMT.
There is no confirmation supplies have been ended. The Russian firm said it would continue to supply gas to Europe.
Russia-Ukraine ties remain tense since Moscow annexed Crimea in February.
Kiev accuses Moscow of supporting separatists in the east of the country. Russia denies the charge.
“Today, from 10:00 Moscow time, Gazprom, according to the existing contract, moved Naftogaz [Ukraine’s state-owned company] to prepayment for gas supplies,” Gazprom said in a statement.
“From today, the Ukrainian company will receive Russian natural gas only in the amounts it has paid for.”
Gazprom had warned it would cut supplies if Ukraine failed to pay $1.95 billion out of $4.5 billion
The move follows crisis talks between Ukraine, Russia and the EU on the issue.
“We reached no agreement. The chances that we meet again are slim,” Gazprom spokesman Sergei Kuprianov said after the latest round of the talks ended in Kiev over the weekend.
However, EU Energy Commissioner Guenther Oettinger, who attended the talks, said he was “not pessimistic” about a deal.
He said he would continue to work for an agreement despite his compromise proposal, that Kiev pay $1 billionn on Monday and the rest in installments, being rejected by Gazprom.
Ukraine’s discounted rate for gas was axed in April after Moscow accused Kiev of failing to pays its bills.
On Monday, Gazprom stressed that it would continue to supply European consumers with gas at “full volume” and that it was Ukraine’s responsibility to make sure the gas transited through the country.
However, correspondents say the EU could be affected.
Earlier this month, Gazprom gave Ukraine more time to settle its gas bill after receiving a part-payment of $786 million.
Ukraine said it refused to clear its debts completely in protest at Gazprom’s recent 80% price increase.
Gazprom ended its discount price for Ukraine, which was negotiated by former President Viktor Yanukovych last December, in April.
Before the discount was cancelled, Ukraine’s gas bill was heavily reduced by Russia to $268 per 1,000 cubic meters.
The price is now $485.50 per 1,000 cubic meters, the highest in Europe.
Almost 15% of gas used in Europe comes from Russia via Ukraine, which is why EU members are taking a particularly close interest in the stand-off, observers say.
The talks that ended on Monday had been brokered by EU representatives.
Heading into the negotiations, Kiev said it was ready to make the $1.95 billion payment if Russia cut its price to $326 per 1,000 cubic meters.
But Russian President Vladimir Putin said $385 per 1,000 cubic meters was his final offer.
Prospects of a breakthrough in discussions were diminished in recent days after increasing tension between Kiev and Moscow over the pro-Russian insurgency in the east of Ukraine.
Moscow reacted angrily to a violent protest outside its embassy in Kiev on Saturday after separatists shot down a Ukrainian military plane, killing all 49 people on board.
Meanwhile, Ukraine accused Russia of sending tanks into the east of the country to support pro-Russian fighters.
Ukraine has threatened to take Russia’s Gazprom to court over what it says are inflated gas prices if the company refuses a new payment deal.
Ukraine’s PM Arseniy Yatseniuk, said Kiev was ready to pay $268 per 1,000 cubic metres of gas and settle its $2.2 billion debt with Gazprom if it agreed to the price.
Gazprom has so far declined to comment.
Russia almost doubled Ukraine’s gas price after the toppling of President Viktor Yanukovich in February.
Ukraine has threatened to take Russia’s Gazprom to court over inflated gas prices (photo AFP)
PM Arseniy Yatseniuk has said his country is not willing to pay at those levels.
“We insist that the price set for Ukraine at the beginning of 2014 [$268 dollars per 1,000 cubic metres] is a market one,” he added.
“We insist on the continuation of this price.”
Ukraine’s state gas company, Naftogaz, has started the process of taking Gazprom to an arbitration tribunal in Stockholm if the Russian state-controlled firm does not agree to the offer within 30 days, Arseniy Yatseniuk said.
Meanwhile, Ukraine’s interim prime minister announced another gas deal that allows supplies from Central Europe to reach the country via Slovakia.
Under the agreement, signed on Monday, Slovakia will reinstate a disused pipeline capable of supplying three billion cubic metres of gas a year to Ukraine.
Ukraine’s energy minister, Yuri Prodan, said the country would soon start gas import talks with Hungary, as it tries to reduce its reliance on Russia, which accounts for about half of its total supply.
In a statement to the International Monetary Fund, US Treasury Secretary Jacob Lew has urged other countries to contribute more to the economic rescue of Ukraine.
Jacob Lew told the IMF that Ukraine’s “sizeable financing needs” meant other nations must add to its $1 billion (720 million euros) loan guarantee.
The appeal came as Ukraine’s interim PM Arseniy Yatsenyuk offered to devolve more powers to eastern regions.
Pro-Russian separatists there are defying the government.
Meanwhile, Washington on Friday announced a third round of sanctions against individuals it has linked to Russia’s annexation of Crimea.
The US Treasury said it had frozen the US-based assets of one former Ukrainian official, a Crimea-based energy firm and six Crimean leaders, including the chairman of the Crimea electoral commission and the mayor of Sevastopol.
Jacob Lew says the US is “bolstering the IMF program through a complementary aid package, which includes a $1 billion loan guarantee and additional technical assistance,” in a statement to the IMF.
Treasury Secretary Jacob Lew has urged other countries to contribute more to the economic rescue of Ukraine
“It is critical that the international community – multilateral development banks and bilaterals – take immediate steps to also support the IMF program by providing financing support, given the sizeable financing needs,” he adds.
The IMF announced a rescue package worth as much as $18 billion last month in a bid to aid Ukraine’s economy, and this has been bolstered to $27 billion with contributions from Europe and the US.
In exchange, the IMF has demanded from Ukraine strict government spending cuts and tax increases.
Ukraine is being squeezed by Russia’s decision this month to stop providing Ukraine with subsidized natural gas.
That discount had been agreed between Russian President Vladimir Putin and Ukraine’s then President Viktor Yanukovych, in which Russia also said it would buy $15 billion-worth of Ukrainian government bonds.
The IMF is also asking Ukraine to crack down on corruption and end central bank support for the Ukrainian currency.
Ukraine’s new government has said it needs $35 billion to pay its bills over the next two years.
Ukraine has not paid off its debt to Russian gas supplier Gazprom despite the passing earlier this week of a deadline for the nation to start reducing its debt. Gazprom says Ukraine owes it $2.2 billion.
European Energy Commissioner Guenther Oettinger told Austria’s ORF radio he was working on a plan to help Ukraine pay its gas bills to ensure its debts do not rise.
On Friday, President Vladimir Putin moved to assure the EU it would not cut off gas supplies. Brussels said it would stand with the new authorities in Kiev if the Kremlin carries out a threat to turn off the tap to Ukraine.
“I want to say again: We do not intend and do not plan to shut off the gas for Ukraine,” Vladimir Putin said in televised comments at a meeting of his advisory Security Council, the Reuters news agency reported.
Russia has turned off the gas tap to Ukraine before, in 2006 and 2009. As the 2009 row escalated, gas supplies to Europe through Ukraine were suspended for two weeks.
But Russia may be reticent about doing it again as it is dependent on revenue from EU customers.
Talks between Russia, Ukraine, the US and the EU – the first four-way discussions since the crisis began – are scheduled to take place on April 17 in Geneva.
In a letter to European leaders, President Vladimir Putin has warned Europe that Ukraine’s delays in paying for Russian gas have created a “critical situation”.
Pipelines transiting Ukraine deliver Russian gas to several EU countries and there are fears that the current tensions could trigger gas shortages.
Armed pro-Russian separatists are holed up in official buildings in Donetsk and Luhansk, in eastern Ukraine.
Meanwhile, a European human rights body has stripped Russia of voting rights.
The Parliamentary Assembly of the Council of Europe (PACE) monitors human rights in 47 member states, including Russia and Ukraine.
Protesting against Russia’s annexation of Crimea last month, PACE suspended Russia’s voting rights as well as Russian participation in election observer missions.
The Russian delegation had boycotted the meeting. Its leader, Alexei Pushkov, described the proceedings as a “farce”.
Vladimir Putin has warned Europe that Ukraine’s delays in paying for Russian gas have created a critical situation
Russian state gas giant Gazprom says Ukraine’s debt for supplies of Russian gas has risen above $2 billion (1.4 billion euros).
Gazprom said on Wednesday it could demand advance payments from Kiev for gas but President Vladimir Putin said the company should hold off, pending talks with “our partners” – widely believed to mean the EU.
President Vladimir Putin warned that the “critical” situation could affect deliveries of gas to Europe, his spokesman Dmitry Peskov was quoted as saying.
Vladimir Putin suggested “special” measures, he added, without elaborating. Nearly one-third of the EU’s natural gas comes from Russia.
Previous Russian gas disputes with Ukraine have led to severe gas shortages in several EU countries. The EU says it has extra gas supplies and reverse-flow technology to deal with any such disruption now.
In Kiev, the authorities said Ukraine would not prosecute pro-Russian activists occupying official buildings in Donetsk and Luhansk if they surrendered their weapons.
Ukraine has accused Russia of stirring up the unrest, a claim Moscow denies.
NATO says up to 40,000 Russian troops are massed near Ukraine’s border.
Ukraine fears that the Russian separatist actions are a provocation similar to the protests that gripped Crimea days before Russian troops annexed the peninsula last month.
The separatists in the east – a mainly Russian-speaking region with close ties to Russia – are demanding referendums on self-rule. In Donetsk they have declared a “people’s republic”.
Russia, the US, Ukraine and the EU are to hold talks in Geneva next Thursday to try to resolve the impasse, EU diplomats have said.
They will be the first four-way talks since the crisis began.
Russian Foreign Minister Sergei Lavrov told US Secretary of State John Kerry by telephone on Wednesday that the meeting should focus on fostering dialogue among Ukrainians and not on bilateral relations among the participants.
In another development, President Vladimir Putin sacked 14 generals, Russian media report.
It was not immediately clear if the move was a routine step. Russia has some 800 generals in its army alone.
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