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Russia has cut off all gas supplies to Kiev, in a major escalation of a dispute between the two nations, Ukrainian Energy Minister Yuri Prodan said.

“Gas supplies to Ukraine have been reduced to zero,” he said.

Russia’s state-owned gas giant Gazprom said Ukraine had to pay upfront for its gas supplies, after Kiev failed to settle its huge debt.

Gazprom had sought from Kiev $1.95 billion – out of $4.5 billion it says it is owed – by 06:00 GMT.

Russia has cut off all gas supplies to Kiev, in a major escalation of a dispute between the two nations

Russia has cut off all gas supplies to Kiev, in a major escalation of a dispute between the two nations

The Russian firm said it would continue to supply gas to Europe.

Russia-Ukraine ties remain tense since Moscow annexed Crimea in February.

Kiev says Moscow backs separatists in the east of the country. Russia denies the charge.

“Today, from 10:00 Moscow time, Gazprom, according to the existing contract, moved Naftogaz to prepayment for gas supplies,” Gazprom said in a statement on Monday morning.

“From today, the Ukrainian company will receive Russian natural gas only in the amounts it has paid for.”

Moments later, both Gazprom and Ukraine’s state-owned Naftogaz company filed lawsuits against each other in the Stockholm arbitration institute.

Gazprom said it wanted to recover $4.5 billion from Naftogaz, which is dealing with gas supplies to Ukraine. Meanwhile, Naftogaz said it was seeking to recover $6 billion in “overpayment” for gas since 2010.

Russian PM Dmitry Medvedev said Ukraine’s position on the issue “smacks of blackmail”.

The latest moves follow crisis talks between Ukraine, Russia and the EU on the issue.

“We reached no agreement. The chances that we meet again are slim,” Gazprom spokesman Sergei Kuprianov said after the latest round of the talks ended in Kiev over the weekend.

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Russian state company Gazprom says Ukraine has to pay upfront for its gas supplies, after Kiev failed to settle its huge debt.

Gazprom had warned it would cut supplies if Ukraine failed to pay $1.95 billion – out of $4.5 billion it says it is owed – by 06:00 GMT.

There is no confirmation supplies have been ended. The Russian firm said it would continue to supply gas to Europe.

Russia-Ukraine ties remain tense since Moscow annexed Crimea in February.

Kiev accuses Moscow of supporting separatists in the east of the country. Russia denies the charge.

“Today, from 10:00 Moscow time, Gazprom, according to the existing contract, moved Naftogaz [Ukraine’s state-owned company] to prepayment for gas supplies,” Gazprom said in a statement.

“From today, the Ukrainian company will receive Russian natural gas only in the amounts it has paid for.”

Gazprom had warned it would cut supplies if Ukraine failed to pay $1.95 billion out of $4.5 billion

Gazprom had warned it would cut supplies if Ukraine failed to pay $1.95 billion out of $4.5 billion

The move follows crisis talks between Ukraine, Russia and the EU on the issue.

“We reached no agreement. The chances that we meet again are slim,” Gazprom spokesman Sergei Kuprianov said after the latest round of the talks ended in Kiev over the weekend.

However, EU Energy Commissioner Guenther Oettinger, who attended the talks, said he was “not pessimistic” about a deal.

He said he would continue to work for an agreement despite his compromise proposal, that Kiev pay $1 billionn on Monday and the rest in installments, being rejected by Gazprom.

Ukraine’s discounted rate for gas was axed in April after Moscow accused Kiev of failing to pays its bills.

On Monday, Gazprom stressed that it would continue to supply European consumers with gas at “full volume” and that it was Ukraine’s responsibility to make sure the gas transited through the country.

However, correspondents say the EU could be affected.

Earlier this month, Gazprom gave Ukraine more time to settle its gas bill after receiving a part-payment of $786 million.

Ukraine said it refused to clear its debts completely in protest at Gazprom’s recent 80% price increase.

Gazprom ended its discount price for Ukraine, which was negotiated by former President Viktor Yanukovych last December, in April.

Before the discount was cancelled, Ukraine’s gas bill was heavily reduced by Russia to $268 per 1,000 cubic meters.

The price is now $485.50 per 1,000 cubic meters, the highest in Europe.

Almost 15% of gas used in Europe comes from Russia via Ukraine, which is why EU members are taking a particularly close interest in the stand-off, observers say.

The talks that ended on Monday had been brokered by EU representatives.

Heading into the negotiations, Kiev said it was ready to make the $1.95 billion payment if Russia cut its price to $326 per 1,000 cubic meters.

But Russian President Vladimir Putin said $385 per 1,000 cubic meters was his final offer.

Prospects of a breakthrough in discussions were diminished in recent days after increasing tension between Kiev and Moscow over the pro-Russian insurgency in the east of Ukraine.

Moscow reacted angrily to a violent protest outside its embassy in Kiev on Saturday after separatists shot down a Ukrainian military plane, killing all 49 people on board.

Meanwhile, Ukraine accused Russia of sending tanks into the east of the country to support pro-Russian fighters.

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Ukraine has threatened to take Russia’s Gazprom to court over what it says are inflated gas prices if the company refuses a new payment deal.

Ukraine’s PM Arseniy Yatseniuk, said Kiev was ready to pay $268 per 1,000 cubic metres of gas and settle its $2.2 billion debt with Gazprom if it agreed to the price.

Gazprom has so far declined to comment.

Russia almost doubled Ukraine’s gas price after the toppling of President Viktor Yanukovich in February.

Ukraine has threatened to take Russia’s Gazprom to court over inflated gas prices

Ukraine has threatened to take Russia’s Gazprom to court over inflated gas prices (photo AFP)

PM Arseniy Yatseniuk has said his country is not willing to pay at those levels.

“We insist that the price set for Ukraine at the beginning of 2014 [$268 dollars per 1,000 cubic metres] is a market one,” he added.

“We insist on the continuation of this price.”

Ukraine’s state gas company, Naftogaz, has started the process of taking Gazprom to an arbitration tribunal in Stockholm if the Russian state-controlled firm does not agree to the offer within 30 days, Arseniy Yatseniuk said.

Meanwhile, Ukraine’s interim prime minister announced another gas deal that allows supplies from Central Europe to reach the country via Slovakia.

Under the agreement, signed on Monday, Slovakia will reinstate a disused pipeline capable of supplying three billion cubic metres of gas a year to Ukraine.

Ukraine’s energy minister, Yuri Prodan, said the country would soon start gas import talks with Hungary, as it tries to reduce its reliance on Russia, which accounts for about half of its total supply.

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In a letter to European leaders, President Vladimir Putin has warned Europe that Ukraine’s delays in paying for Russian gas have created a “critical situation”.

Pipelines transiting Ukraine deliver Russian gas to several EU countries and there are fears that the current tensions could trigger gas shortages.

Armed pro-Russian separatists are holed up in official buildings in Donetsk and Luhansk, in eastern Ukraine.

Meanwhile, a European human rights body has stripped Russia of voting rights.

The Parliamentary Assembly of the Council of Europe (PACE) monitors human rights in 47 member states, including Russia and Ukraine.

Protesting against Russia’s annexation of Crimea last month, PACE suspended Russia’s voting rights as well as Russian participation in election observer missions.

The Russian delegation had boycotted the meeting. Its leader, Alexei Pushkov, described the proceedings as a “farce”.

Vladimir Putin has warned Europe that Ukraine's delays in paying for Russian gas have created a critical situation

Vladimir Putin has warned Europe that Ukraine’s delays in paying for Russian gas have created a critical situation

Russian state gas giant Gazprom says Ukraine’s debt for supplies of Russian gas has risen above $2 billion (1.4 billion euros).

Gazprom said on Wednesday it could demand advance payments from Kiev for gas but President Vladimir Putin said the company should hold off, pending talks with “our partners” – widely believed to mean the EU.

President Vladimir Putin warned that the “critical” situation could affect deliveries of gas to Europe, his spokesman Dmitry Peskov was quoted as saying.

Vladimir Putin suggested “special” measures, he added, without elaborating. Nearly one-third of the EU’s natural gas comes from Russia.

Previous Russian gas disputes with Ukraine have led to severe gas shortages in several EU countries. The EU says it has extra gas supplies and reverse-flow technology to deal with any such disruption now.

In Kiev, the authorities said Ukraine would not prosecute pro-Russian activists occupying official buildings in Donetsk and Luhansk if they surrendered their weapons.

Ukraine has accused Russia of stirring up the unrest, a claim Moscow denies.

NATO says up to 40,000 Russian troops are massed near Ukraine’s border.

Ukraine fears that the Russian separatist actions are a provocation similar to the protests that gripped Crimea days before Russian troops annexed the peninsula last month.

The separatists in the east – a mainly Russian-speaking region with close ties to Russia – are demanding referendums on self-rule. In Donetsk they have declared a “people’s republic”.

Russia, the US, Ukraine and the EU are to hold talks in Geneva next Thursday to try to resolve the impasse, EU diplomats have said.

They will be the first four-way talks since the crisis began.

Russian Foreign Minister Sergei Lavrov told US Secretary of State John Kerry by telephone on Wednesday that the meeting should focus on fostering dialogue among Ukrainians and not on bilateral relations among the participants.

In another development, President Vladimir Putin sacked 14 generals, Russian media report.

It was not immediately clear if the move was a routine step. Russia has some 800 generals in its army alone.