Report: Russian gas keeps flowing to Ukraine as deadline passes

MOSCOW, Jun 10 (PRIME) -- Natural gas supplies to Ukraine and the E.U. were stable on Tuesday after a Russian deadline passed for Kiev to repay some of its debts or face a supply cut, sources at Russian exporter Gazprom said, according to Reuters.

The gas dispute is at the heart of a crisis between Russia and Ukraine, and failing to resolve it would fuel tensions and set back peace moves that are gaining momentum after weeks of violence in east Ukraine.

Russia had given Ukraine until 10:00 a.m. to pay, but seemed to have pulled back from the deadline after officials said gas talks brokered by the European Commission would continue in Brussels later on Tuesday or Wednesday.

With Ukraine looking poised to pay off more of its debt, talks have stalled on price, threatening possible supply disruptions to the E.U., which gets about a third of its gas imports from Russia, almost half of it via Ukraine.

A source at Gazprom said Russia was supplying Ukraine with the usual volumes of gas, and may have even increased it recently.

"Ukraine has been taking 112-115 million cubic meters a day, at a peak, as it pumps gas into storage facilities. Transit to Europe remains stable, at 200 million cubic meters per day," the source said.

A spokesman for the gas company confirmed that flows to the E.U. were stable.

Talks between Russia, Ukraine and the European Commission have been continuing while Kiev, Moscow and the Organization for Security and Cooperation in Europe (OSCE) discuss peace proposals by Ukraine's new president, Petro Poroshenko.

Those talks have produced what Kiev says is a mutual understanding on key aspects of the peace plan, intended to end an insurrection by separatist rebels who want to join parts of Russian-speaking east Ukraine with Russia.

Scores of people have been killed in the crisis, which flared after Poroshenko's predecessor was overthrown in February and fled to Russia, which later annexed the Crimea region from Ukraine.

DISAGREEMENT ON PRICE MECHANISM

The latest gas talks ended early on Tuesday without a deal on the future price Moscow would charge Kiev.

Ukraine wants to change the 2009 contract that locked Kiev into buying a set volume of gas, whether it needs it or not, at U.S. $485 per 1,000 cubic meters - the highest price paid by any client in Europe.

Moscow dropped the price to $268.50 after Ukraine's then-President Viktor Yanukovich turned his back on a trade and association agreement with the E.U. last year, but reinstated the original price after he was ousted in February.

Ukrainian Energy Minister Yuri Prodan said the negotiations had stumbled over a Russian price mechanism proposal, which would link lower prices to an export duty.

Russia has floated the idea of scrapping its export duty for gas exports to Ukraine at the amount of $100 per 1,000 cubic meters, introduced after Moscow annexed Crimea, to reduce the price for the neighboring country.

Russian Energy Minister Alexander Novak said on Tuesday he had proposed "a very constructive plan, which we believe all stakeholders could and should accept".

Moscow has said Ukraine must pay off some of its debt before it can talk about price. Kiev paid off $786 million of its debts in late May and Russian officials have suggested it could pay off a $1.45 billion for November and December debts and a further $500 million as a part of a bill for April and May deliveries.

"The Russia-Ukraine gas tensions are not over yet, and will likely continue for a while, further threatening the stability and reliability of Russian gas transit to the E.U. via Ukraine," analysts from Moscow-based Alfa bank said in a note.

End