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MOSCOW – Russia's state-controlled gas producer Gazprom on Monday cut shipments to Ukraine in a dispute over prices and unpaid debts.
The decision came as Ukraine missed a payment deadline set by Gazprom, which said that from now on it will demand advance payment from Ukraine for any future supplies.
Customers in Europe, who receive Russian gas via pipelines crossing Ukraine, are unlikely to be affected during the summer, but the move raises the threat of supply disruptions in the fall.
Here is a look at what the parties want and why it matters.
The Kremlin and Russian gas officials demand that Ukraine settle a $4.5 billion debt for past gas supplies and pay $385 per 1,000 cubic meters of gas on future deliveries.
They say the price is similar to what Ukraine was paying until last fall and is on par with what Ukraine's neighbors pay for Russian gas.
Ukraine's pro-Russian former president, Viktor Yanukovych, got a much lower price of $268.5 per 1,000 cubic meters in December, as part of a Moscow bailout after he ditched a partnership pact with the European Union. Russia canceled all price discounts after Yanukovych was chased from power by protesters in February.
The cash-strapped government of Ukraine, which depends on Western loans to avoid bankruptcy, says it's willing to pay its gas debt if Gazprom drops the price for future deliveries back down to $268.5 per 1,000 cubic meters.
Ukrainian officials claim that price is market-based, even though it's significantly lower than what other European countries pay for Russian gas.
Ukraine accuses Russia of using gas as a weapon to punish it for its intention to integrate into Europe. The gas dispute comes amid a pro-Russian insurgency in eastern Ukraine that flared up after Moscow annexed Ukraine's Black Sea peninsula of Crimea in March.
WHY IT MATTERS:
European customers of Gazprom may face disruptions of supply in the winter if the dispute isn't resolved quickly, similar to cutoffs that came during previous Russian-Ukrainian gas wars in 2006 and 2009.
Europe gets about 30 percent of its gas from Russia, and about half of that goes via Ukraine. Some of the EU nations are even more dependent on Russian gas. Bulgaria, Slovakia and Hungary get 80 percent or more of their gas from Russia, while Poland, Austria and Slovenia get around 60 percent.
Ukraine now has about 13.5 billion cubic meters in underground storages, and the EU said those should be at 18-20 billion cubic meters at the end of the summer to ensure uninterrupted supply in the fall.