Russia-Ukraine natural gas deal negotiations falter over due bill

European Union-brokered talks to resolve a bitter natural gas supply dispute between Russia and Ukraine stalled on Thursday as Moscow demanded that Brussels and Kiev first agree on how Ukraine will pay its huge bill.

The talks were due to resume later in the day as the international community looked anxiously ahead to elections planned on Sunday by rebels in the parts of eastern Ukraine they control.

The European Union and the United Nations said on Wednesday that the polls, which Russia intends to recognize, will harden divisions on the ground and undermine a peace road map backed by Moscow in September.

Highlighting wider tensions, NATO reported an upsurge in Russian military activity over European airspace, prompting a whole series of intercepts in response to help reassure East European allies.

In Brussels, meanwhile, money and Ukraine's lack of it took center stage.

"The European Commission must reach an agreement with Ukraine over the question of financing," a spokesman for Russian gas giant Gazprom said in Moscow. "Otherwise, negotiations make no sense."

Earlier this month, EU Energy Commissioner Guenther Oettinger negotiated an outline deal whereby Ukraine would pay $3.1 billion to Russia by the end of the year to settle its outstanding bills.

In return, Russia would cut the price of deliveries through to March 2015 by about 20 percent to $385 per 1,000 cubic meters.

Oettinger said at the time an agreement was close, but instead it quickly fell apart when it became clear Ukraine could not pay. It promptly asked the European Union for a new loan of 2 billion euros ($2.5 billion).

Oettinger had been cautious going into the latest round of talks on Wednesday, saying there was only a 50 percent chance of an agreement given Kiev's financial problems.

"Our common ambition is to come to an interim solution, to come to a winter package to solve our security of supply," Oettinger said.

The EU gets about a third of its gas from Russia, of which about a half transits through Ukraine.

The EU wants to avoid a repeat of 2006 and 2009 when Russia turned off the taps on Ukraine, disrupting deliveries onwards to Europe during two very cold winters.

"Jointly prepared documents laying down a common understanding have been prepared and are now with the respective governments in Moscow and Kiev for approval," a spokeswoman for Oettinger said.

European Commission President Jose Manuel Barroso said a deal was "within reach", and called on both sides "to seize the opportunity and conclude the negotiations".

It is far from certain that Brussels is ready to help finance the deal, given previous EU commitments to Ukraine. Kiev has also secured large loans from the International Monetary Fund.

(China Daily 10/31/2014 page12)