Russia Cuts Off Ukraine's Natural Gas Supplies

Shawn Bailey

As of 10 am Moscow time, Russia has cut off the gas supply line to the Ukraine.

Following the annexation of Crimea and invasion of the Ukraine by Russian separatists, the state-backed gas company Gazprom appears to be the latest tool in Putin's arsenal. Aleksey Kupriyanov, a spokesman for Gazprom, stated the deadline for the cutoff.

"If we receive no pre-payment by 10:00 am (0600GMT), then we obviously will deliver no gas."

The Ukrainian gas company NAK Naftogaz Ukrainy reportedly owes Russia 4.5 billion dollars for its previous gas supplies. Gazprom demanded 1.95 billion of the amount be paid before the cutoff time today. The Ukraine offered to pay one billion dollars up front, which Gazprom rejected. The failed negotiations took place in Kiev. At the core of the battle between the oil companies is the unit price of the gas itself.

Ukrainian former President Viktor Yanukovych paid only $268.5 per 1,000 cubic meters. CNN reports that the average price of gas for European countries in 2013 was $377.50. Russia's prices for the current Ukrainian government has been as high as $485. The latest Russian offer was $385, while Ukraine is asking for $326. Gazprom has filed a lawsuit with the Stockholm Arbitration Court asking for the entire $4.5 million. The 80 percent price hike Russia has imposed on Ukraine has spurred Naftogaz to file a suit asking for six billion dollars it has overpaid for services since 2010.

The current Ukrainian Prime Minister Arseniy Yatsenyuk has railed against the price gouging.

"Ukrainians will not take out of their pockets $5 billion annually for Russia to use this money to buy weapons, tanks and jets and bomb Ukrainian territories."

Russian separatists continue to cause chaos in the Ukraine. On June 14 Russian militants used antiaircraft rockets to shoot down a military transport plane, killing all 49 passengers aboard. Talks continue to go downhill as ABC News reported that Russian Foreign Minister Sergey Lavrov denounced a Ukrainian official for using a four-letter word when referring to Vladimir Putin.

Some European countries worry about disruptions to their own gas supplies. Some European countries get 60 to 80 percent of their gas, which runs directly through the Ukraine, from Russia. Although the Ukraine has promised to make sure the lines remain open, there have been interruptions in the past, and Russia threatens more action if the Ukraine attempts to siphon gas from the line. Naftogaz has said it can function without Russian gas until December. European Union spokeswoman Sabine Berger says the EU is working on a way to get Ukraine gas through Slovakia.

Image via Mirror