Russia cuts off gas to Ukraine

Kiev - Russia cut off gas to Ukraine on Monday in a dispute over unpaid bills that could disrupt supplies to the rest of Europe and set back hopes for peace in the former Soviet republic.

After weekend violence that included the loss of 49 troops in the downing of a Ukrainian plane, Russia said Kiev missed a deadline for a $1.95bn debt payment and it would now only get gas it has paid for in advance. It insisted Ukraine must also ensure that it lets Russian gas flow through international pipelines to Moscow's clients in the European Union.

Kiev and Moscow blamed each other for the failure to agree overnight on the price of future gas deliveries and refused to abandon well established positions: Russia offering a discount and Ukraine rejecting that as a tool for political manipulation.

The talks are bound up with the worst crisis between Russia and Ukraine since the Soviet Union collapsed - a crisis that has brought Western sanctions on Moscow, the Russian annexation of Crimea and Cold War-style sabre-rattling along the borders.

Western-backed Ukrainian President Petro Poroshenko, elected last month to replace the Kremlin-friendly leader ousted in February, said on Monday he wanted troops to regain full control of the border with Russia this week. After that, there could be a ceasefire and efforts to come up with a peace plan.

Hopes of a reduction in tension had already been dented before the failure of the gas talks by Saturday's shooting down of the aircraft by pro-Russian separatists at Luhansk in the east, an attack on Russia's embassy in Kiev and new accusations from Nato that Russia is arming the Ukrainian rebels.

All that sent Russian financial markets lower on Monday and helped oil and gas prices climb in Europe that were already firm on fears of supply disruption due to violence in Iraq.

Ukrainian Prime Minister Arseny Yatseniuk accused Russia of deliberately blocking a deal to cause Kiev supply problems next winter, when temperatures plunge and heating needs increase.

"But it is not about gas. It is a general Russian plan to destroy Ukraine," Yatseniuk said in Kiev. "It is yet another step against the Ukrainian state and against Ukrainian independence."

Ukraine has at least 12 billion cubic metres of gas in storage, enough to meet its and the EU's needs over the summer.

A long-term reduction of supply could hit EU consumers, which get about a third of their gas needs from Russia, around half of it through pipelines that cross Ukraine. Earlier price disputes led to "gas wars" in 2006 and 2009, and Russian accusations Ukraine stole gas destined for the rest of Europe.

Gazprom's Miller said Russia would provide Ukraine with the volumes necessary to cover EU demand, but implied that Kiev may take some of those supplies for their own use - a potential shortfall Moscow could not be expected to cover.

"Regarding transit risks, they exist and they are not insignificant," Miller said of supplies reaching the EU.

The bloc's energy commissioner, Guenther Oettinger, who has been brokering the gas talks, said in Vienna that the EU should top up its storage or could face problems in winter.