UPDATE 2-Russia's Gazprom demands Ukraine pay off overdue gas bill

Vladimir Soldatkin
Tuesday, 29 Oct 2013 | 5:25 AM ET

* Gazprom says Kiev failed to pay for August supplies

* Analyst says danger of new gas war

MOSCOW, Oct 29 (Reuters) - Russian gas export monopoly Gazprom demanded Ukraine pay an overdue gas bill "urgently" on Tuesday, saying it was extremely concerned about the debt, reviving fears of a new "gas war" between the neighbours.

Russia and Ukraine waged two such wars over gas prices in the winters of 2006 and 2009, with Moscow halting deliveries not only to Ukraine but to the rest of Europe, forcing some in the European Union to try to find alternative sources of energy.

Gazprom CEO Alexei Miller said Ukraine had been given until Oct. 1 to pay for August natural gas deliveries, but no payment had been received so far.

He told journalists Gazprom had paid Ukraine $1 billion up front for gas transit though its territory to Europe in order to allow Kiev to purchase gas for storage and to secure shipments to Europe over the winter.

"The situation with Ukraine's gas payments is coming to the boil. Ukraine has failed to pay fully for August supply," Miller said during a meeting presided over by Prime Minister Dmitry Medvedev."

"We have to wait for a reaction of our Ukrainian partners ... If there is no reaction we have to move to advance payments," Medvedev said.


Miller's words were seen as a warning to Ukraine and the European Union, less than month before Kiev is expected to sign agreements on association and free trade with the bloc in Lithuania, a move that has angered Russia.

"The (Ukrainian) government is monitoring the issue, but this primarily is a question concerning two companies and they have to sort things out," said Ukrainian Prime Minister Mykola Azarov on Tuesday, according to his press service.

Ukraine's state oil and gas firm, Naftogaz, declined to comment on Gazprom's remarks.

President Vladimir Putin wants Ukraine to join a Moscow-led customs union and Russia has put pressure on its neighbour, which faces large payments to service its debt over the next 18 months, by tightening customs rules and banning some imports.

"There is a danger of a new gas war with Ukraine, where the economy is struggling," said Sergei Vakhrameyev, an analyst with Ankorinvest brokerage in Moscow.

"The situation of past years, when gas flows to Europe halted could be repeated again."

Earlier this year, Russia hinted that gas prices which Kiev has called "exorbitant" could be cut if it joined the customs union, which unites Russia with two other former Soviet republics, Kazakhstan and Belarus.

Putin and Ukrainian President Viktor Yanukovich met in the Black Sea resort of Sochi on Sunday for bilateral talks, although neither side has commented on what was discussed.

Ukraine, which pays about $400 per 1,000 cubic metres for Russian gas, imports nearly all of its gas from Russia. Naftogaz said earlier this month it had 17 billion cubic metres of gas in storage, enough to get through the winter.

Gazprom ships more than half of its gas to Europe via Ukraine. This year it aims to increase exports to Europe, where it provides a quarter of gas needs, to 152 billion cubic metres from 138 bcm last year.

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