Moscow to Kiev: We're turning off your gas supply

Russia on Monday said it would cut off gas supplies to Ukraine as a payment deadline passed and negotiators failed to reach a deal on gas prices and unpaid bills.

The decision does not immediately affect the gas flow to Europe, but could disrupt the long-term energy supply to the region if the issue is not resolved, analysts said.

Gazprom spokesman Sergei Kupriyanov said that since Ukraine had paid nothing for the gas by Monday, Moscow has no legal grounds to supply Ukraine anymore.

"Gazprom supplies to Ukraine only the amount that has been paid for, and the amount that has been paid for is zero," Kupriyanov said on Monday morning.

The pipeline to Ukraine also carries gas meant for the rest of Europe, but Kupriyanov said that this supply will continue as planned. Ukraine has the obligation to make sure the gas will reach European customers, he said.

However, Gazprom has notified the European Commission of "a possible disruption in the gas transit" in case Ukraine decides to siphon off the gas, the company said.

Analyst Tim Ash at Standard Bank PLC said Russia was likely to cut off only the gas meant for Ukraine, but that Ukraine could in theory simply take what it wants since the gas is intermingled. That would result in a shortage in pipelines to Europe that could hinder the buildup of stored gas ahead of the winter heating season when demand is higher, he said.

"So the message is that this is unlikely to bring a short-term hit to gas supply in Europe, but it will build up problems for the winter unless a deal is reached quickly," he said in an e-mail.

Ukraine has been chronically behind on payments for the gas needed to heat homes and fuel its industries. The gas conflict is part of a wider dispute over whether Ukraine aligns itself with Russia or with the European Union.

It comes in the wake of the severe crisis in relations between the two countries that has followed Russia's annexation of Crimea in March. Ukraine accuses Russia of supporting a separatist insurgency in its eastern regions, which Russia denies.

EU Energy Commissioner Guenther Oettinger warned on Monday that the bloc may face gas shortages this winter after Russia cut supplies to Ukraine following the collapse of talks.

"The next weeks will not be a problem, we will receive our gas volumes," Oettinger said in Vienna, cautioning that if Ukraine uses its reserves "then we would have a problem with a cold winter".

European Commission President Jose Manuel Barroso pressed Russia and Ukraine on Monday to resolve the gas supplies dispute.

"I would like once again to call on the two parties to make an effort to compromise," Barroso told an economic forum in Santander, northern Spain. A compromise plan on the table "is a good proposal", he said.

AP-AFP