Europe is at risk of gas supply disruptions after Russia rejected an 11th-hour compromise deal with Ukraine and cut its supplies in a feud that has further fractured East-West relations.
Ukraine hosted the last-gasp talks hoping to keep an energy shortage from compounding the problems of the new pro-Western leaders as they confront a two-month separatist insurgency threatening the very survival of the ex-Soviet state.
But Russia’s state gas giant Gazprom said it had switched Ukraine to a pre-payment system on Monday – a move that effectively halts all shipments because Kiev has not forwarded money for future gas deliveries to Moscow.
“We have been informed that gas deliveries to Ukraine have been reduced to zero, with only the volumes sent for transit to European states,” Ukrainian Energy Minister Yuriy Prodan told a government meeting.
Gazprom said it had notified Europe of possible gas disruption and lodged a $US4.5 billion ($A4.87 billion) lawsuit against Ukraine with an arbitration court in Stockholm.
Ukraine said it would now try to secure greater gas deliveries from its western European neighbours to make up for the lost Russian supplies.
Kiev also lodged a $US6.0 billion ($A6.49 billion) suit against Gazprom with the same Stockholm court to recover its past “overpayment” for gas.
Ukraine receives half its gas from Russia and transports 15 per cent of the fuel consumed in Europe – prompting EU Energy Commissioner Guenther Oettinger to step in to try to resolve the feud.
Oettinger said problems for Europe would probably only begin once Ukraine uses up the gas it had kept in reserve – an amount analysts believe should last for at least three more months.
“The next weeks will not be a problem, we will receive our gas volumes,” Oettinger said.
But he added that Europe “would have a problem with a cold winter” if Ukraine ran out of its storage supplies.
Kiev had said it was ready to make a $US1.95 billion ($A2.11 billion) payment demanded by Moscow if Russia agreed to cut its ongoing rate to $US326 from $US485.50 for every 1000 cubic metres of gas.
But Putin had insisted that $US385 per 1000 cubic metres was his final offer.
The European Commission said Oettinger had offered a compromise that would see Kiev pay $US1 billion Monday and the rest of the debt in instalments stretching through the end of the year.
Oettinger also proposed that Ukraine accept the $US385 figure demanded by Putin in the winter and see its rate drop to $300 “or a few dollars more” during summer months.
“The Ukrainian side was ready to accept this, but for the moment the Russian partners were not,” the European Commission said in a statement.
The gas talks were further clouded by a diplomatic row that exploded after Ukraine’s acting foreign minister called Putin “a prick” while trying to restrain protesters who attacked Moscow’s embassy compound in Kiev on Saturday.
Nationalists tore down the embassy’s Russian tricolour while others smashed its windows and overturned diplomats’ cars.
The protest followed the deaths of 49 servicemen on Saturday when pro-Kremlin rebels downed their military transport plane with weapons Kiev believes were supplied by Moscow.
Acting Foreign Minister Andriy Deshchytsya was filmed telling protesters “Putin is a prick” in a bid to calm the seething crowd.
His comments became headline news in Russia and the anger among senior Moscow figures was palpable.
Deshchytsya “allowed himself to make comments that cross all lines of decency,” said Russian Foreign Minister Sergei Lavrov.
“I do not know how we are going to work with him from now on.”