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Ukraine suspends gas payments to Russia until talks conclude

A gas pipe is pictured at an underground gas storage facility in the village of Mryn, 120 km (75 miles) north of Kiev May 21, 2013. REUTERS/
A gas pipe is pictured at an underground gas storage facility in the village of Mryn, 120 km (75 miles) north of Kiev May 21, 2013. REUTERS/

KIEV (Reuters) - Ukraine's state-run energy company Naftogaz has suspended gas payments to Russia until the conclusion of price talks, chief executive Andriy Kobolev was quoted as saying on Saturday.

Russia, which last month angered Western powers by annexing Ukraine's Crimea peninsula, has raised the price it charges Kiev for gas and said it owes Moscow $2.2 billion in unpaid bills. It also says Kiev had failed to pay its bill on time.

Russian gas giant Gazprom earlier this month increased gas price for Ukrainian consumers to $485 per 1,000 cubic meters (tcm) from $268 for the first quarter, saying Kiev was no longer eligible for previous discounts.

"The question of repayment of debt is directly linked to the maintenance of gas prices at the level of the first quarter," Kobolev told the Zerkalo Nedely weekly in an interview, referring to the original price of $268 per tcm.

"We see no reason to revise the price. We consider the price at around $500 as non-market, unjustified and unacceptable. Accordingly, we have suspended payments for the period of the price negotiations."

Kiev gets about half of its gas from Moscow and a large proportion of Europe's gas is pumped from Russia via Ukraine.

High debts, which could justify a reduction in gas shipments to Ukraine, have raised the spectre of a repeat of previous "gas wars", when disputes between the two former Soviet republics led to a cut in onward supplies to western Europe.

A repeat could hurt Russia as its public revenues depend on selling gas to Europe.

Russian President Vladimir Putin warned on Thursday that Moscow could cut off gas to Ukraine, potentially threatening European supplies, but later played down the threat.

"I want to say again: We do not intend and do not plan to shut off the gas," he said on Friday.

(Reporting by Pavel Polityuk; Editing by Mark Heinrich)

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