Ukraine and Russia gas talks go to wire

The gas dispute between Russia and Ukraine is set to go to the wire as the two countries attempt to hammer out a compromise deal that would avoid disrupting supplies.

Ukraine said it had made a payment of $786 million to Gazprom on Friday afternoon following a meeting with Russia and the EU in Berlin – its first payment for gas supplies since February – a move that could open the way to defuse the crisis.

Read MoreGazprom: Ukraine will owe $5.2 billion on June 7

Gazprom
Andrey Rudakov | Bloomberg | Getty Images
Gazprom

However, with Gazprom yet to receive the money, the three sides agreed to meet again on Monday – just one day before the Russian state-controlled company had threatened to reduce supplies if Ukraine left its debts unpaid.

Günther Oettinger, EU energy commissioner, said he hoped a deal could be struck before Tuesday. "We have not yet reached a breakthrough but we have made progress," he said. "What is needed now is patience and a functioning bank in New York. Then the payment will be received on Monday morning."

The negotiations are being watched in Europe, where memories of supply disruptions in previous gas crises in 2006 and 2009 are still fresh. About 15 per cent of Europe's gas supplies are delivered via Ukraine.

Read MoreEU to Ukraine: Pay Russia for gas at a fair price

Moscow has softened its position in recent weeks, indicating it would be ready to lower prices to Ukraine from the $485 per thousand cubic metres announced by Gazprom in April. Ukraine disputes that price, which was nearly double the previous rate of $268.

However, the negotiations are set to go down to the wire. Alexei Miller, Gazprom's chief executive, this week again stated that the company's plan was to move Ukraine to a system of prepayment – with supplies being cut on Tuesday morning if no payment was made by Monday night.

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On Friday, Alexander Novak, Russian energy minister, said Moscow would seek to avoid a disruption to supplies. "We have got very little time left for new discussion but we are very constructively minded," he said. "We do not want to see a situation where from Tuesday onwards this system of prepayments will be put into practice."

Arseniy Yatseniuk, Ukraine's interim prime minister, said that if the talks did not result in a deal, Kiev would push ahead with a threat to initiate arbitration hearings against Gazprom in a Stockholm tribunal.

Read MoreRussia tightens squeeze on Ukraine with gas price rise

"I hope the final round of talks to take place on Monday . . . these talks will finish either with signing of an agreement, or with the filing of litigation which we have been clear on," he said.

The payment by Kiev is less than the $2 billion that the European Commission had proposed Ukraine should pay as a prelude to more talks.

Progress on the gas dispute came after Gazprom accused the EU of applying double standards to block its South Stream gas pipeline into Europe.