Moscow (AFP) – Russia’s state gas giant Gazprom warned on Monday it may halt shipments to Ukraine on June 3 in a repeat of previous energy wars that hit Europe.

Gazprom chief executive Alexei Miller said Russia’s crisis-torn neighbor must pay upfront for its June deliveries because of debts totaling $3.51 billion (2.55 billion euros).

Kiev had until the morning of June 3 to make the payment “or Ukraine will receive zero cubic meters (of gas) in June,” he added.

Miller’s comments — made during a meeting with Russian Prime Minister Dmitry Medvedev — marked a sharp escalation in a trade war that European Union officials have urgently tried to avert without success.

Ukraine has refused to cover its obligations in protest over Moscow’s decision to nearly double the price it charges Kiev for gas imports following the February overthrow of its Kremlin-backed regime.

Nearly 15 percent of all gas consumed in Europe is delivered from Russia via Ukraine.

The danger for EU nations is that Ukraine — its state coffers effectively empty and almost completely reliant on $17 billion promised by the International Monetary Fund — will not cover its debt and instead start taking the gas Russia had earmarked for its European clients.

The nation of 46 million began dipping into supplies meant for Europe when it was cut off from Russian gas during previous price disputes in 2006 and 2009.

Miller’s comments came shortly after Russia’s deputy energy minister stepped up the rhetoric by noting that Moscow saw no point in discussing the dispute until Kiev began paying its debts.

“We are saying that in order to discuss any sort of compromise, the debts must be paid first,” news agencies quoted Russia’s Deputy Energy Minister Anatoly Yanovsky as saying. “Pay the debts and then we can agree on something.”

Russia’s prime minister noted that Kiev could simply dip into its IMF aid package and questioned Ukraine’s refusal to do so until now.

“Our Ukrainian partners have the money,” news agencies quoted Medvedev as saying. “According to our information, Ukraine has received money from the first IMF tranche.”

Ukraine’s Finance Minister Oleksandr Shlapak said earlier on Monday that Kiev was willing to cover its outstanding payment to Moscow as soon as Russia lowered its price.

Shlapak told reporters in Kiev that Ukraine was prepared to issue bonds worth $2.16 billion to cover its gas arrears.

“If Russia extends the old price of $268 per 1,000 cubic metres through the end of the year, we will immediately cover the debt,” the UNIAN news agency quoted Shlapak as saying.

Gazprom now charges Ukraine $485.50 per 1,000 cubic metres — the highest rate of any of its European clients.

Medvedev received Miller and Russian Energy Minister Alexander Novak moments after their return from what appears to have been a failed round of talks on the crisis with EU and Kiev officials in Brussels.

The first round of negotiations conducted in Warsaw last week had resulted in an agreement for Russia to maintain its deliveries while the talks continued.

AFP Photo/Andrey Sinitsin
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