© AFP/ Alexander ZobinRussia closes for the gas after Ukraine has refused to pay for the gas it has received.
"This decision was taken due to systematic failure of Naftogaz Ukraine to pay. The debt of the company for Russian gas stands at $4.458 billion, including $1.451 billion for November and December 2013, and $3.007 billion for April-May 2014," Gazprom said in a statement posted on their website.
"They've paid zero. Correspondingly we deliver zero," Sergey Kupriyanov, a Gazprom spokesperson said in a press conference following the announcement.
Reuters reports that gas supplies to Ukraine were restricted off as soon as the deadline at 10:00am in Moscow passed.
Gazprom announced that it is filing a lawsuit against Naftogaz with the Stockholm Chamber of Commerce Arbitration to seek payment for the $4.5 billion debt as well as Ukraine's failure to import the agreed upon amount of natural gas under their "take or pay" contract with Gazprom over the past two years. The penalty in accordance with the contract could be around $18 billion.
This week, Ukrainian energy minister Yury Prodan reiterated Kiev's intentions to file an appeal with the arbitration court in Stockholm. Prodan stressed that taking the case to Stockholm is the only way to settle the matter.
Kiev was also late in payments in the winters of 2006 and 2009. Both periods lasted about three weeks, during which Kiev attempted to siphon off supplies for themselves, which left millions of European homes without heat.
"Volumes of gas for European customers will be fully met in compliance with their contracts. Naftogaz must ensure transportation to the delivery points," Kupriyanov said.
Further actions will be taken after Gazprom head meets with Russian President Vladimir Putin today, Deputy Prime Minister Arkady Dvorkovich told reporters at the World Petroleum Congress, being held in Moscow June 15-19.
Russia's energy minister Aleksander Novak and Gazprom head Aleksey Miller will hold a press conference later this afternoon.
Ukraine has accumulated a multi-billion dollar debt for natural gas supplied by Russia and is unwilling to pay. It calls the 10-year gas contract that former Prime Minister Yulia Tymoshenko signed with Russia back in 2009 unacceptable and demands that Russia lower the price.
Moscow was willing to offer a discount and even recalculate the debt Ukraine has accumulated since April to account for it, but Kiev rejected the offer, saying it was not good enough. Gazprom considers Ukraine's position a form of blackmail.
After negotiations on Sunday, Gazprom announced that their final pricing offer was $385 per 1,000 cubic meters of natural gas, which Ukraine still rejected.
Price disputes between the two neighbors intensified after a government coup followed by violence in Ukraine, when the price of gas exports from Moscow to Kiev shot up from $268.50 to $485.00.
Europe imports a third of its natural gas from Russia, and nearly half of that is delivered via Ukraine. In 2012, over 84 billion cubic meters of gas traveled from Russia to Europe through Ukraine.
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