Russia's Gazprom has cut off Ukraine's gas supply, after Kiev failed to meet a 10 a.m. deadline for the $2 billion it owes the company.
A spokesman said that Gazprom would no longer accept credit from Kiev, explaining that it "supplies to Ukraine only the amount that has been paid for, and the amount that has been paid for is zero." Ukraine's energy minister confirmed the statement, saying "Gazprom has decreased deliveries of gas to zero." The decision follows months of negotiations between Kiev and Gazprom over the price of gas, and over how much Ukraine owes for gas that had been discounted under a previous deal — struck by ousted president Viktor Yanukovych — with Moscow.
Now, Russia and Ukraine will face off in court, per the New York Times:
The company, which is 50.01 percent owned by the Russian government, also said that it was filing a lawsuit in an arbitration court in Stockholm to force Ukraine to pay $4.5 billion for gas that had already been delivered... Naftogaz responded by saying that it had filed a suit of its own in the Stockholm court against Gazprom to establish a fair market price for the gas. Naftogaz said the suit would also ask the court to fine Gazprom for what the Ukrainian company claims to be $6 billion in overcharging since 2010.
Europe's Gazprom gas is funneled through Ukraine, and the decision has prompted fears in the EU that its own supply could be compromised, though both Kiev and Gazprom have said they won't interrupt the service. The timing of the decision also should relieve some of the EUs concerns, however. Europe relies on Russia for 15 percent of its gas supply, but any disturbance to the shipment would have less of an impact over the summer.
Gazprom's decision comes amidst fighting in Ukraine and a recent confirmation by the U.S. that the Kremlin has supplied tanks and weapons to Russian separatists. Though Russia insists that the decision to cut off gas to Ukraine is strictly business, leaders in Kiev see it as just another way for Moscow to attempt to control the region. Ukrainian Prime Minister Arseniy Yatsenyuk said that the move "is not about gas," and called it "a general plan for the destruction of Ukraine.” The accusations keep flying on both sides:
Gazprom chief says Kiev has been pumping Russian gas into its underground storage facilities but not paying for it— Steve Rosenberg (@BBCSteveR) June 16, 2014
The dispute will likely last months, and could become more urgent if it continues into the winter.