Russia's state-run energy giant, Gazprom, has cut all natural gas supplies to Ukraine after failing to reach an agreement on payments. The Gazprom's decision could also disruption gas supplies to Europe.
As the gas taps were switched off both sides remained in deadlock. Both sides blame each other for the failure to an agreement.
"They haven’t agreed to these conditions and artificially created a gas crisis. That’s a pity. And it smells like blackmail." Russian Prime Minister Dmitry Medvedev said.
Russia wanted $1.95 billion to continue gas shipments to Ukraine. Now Russia warns there are, "significant," risks for gas transit to Europe through Ukraine. Around 15 percent of EU gas supplies flow through Ukraine.
The CEO of Russia state energy giant Gazprom says Ukraine has had gas for free for far too long. Gazprom spokesman, Sergey Kupriyanov, said, quote: "We will supply gas only in the amount paid for. They paid zero. Correspondingly it’s zero, he said."
While winter is still a long way off, Sergei Agibalov from Russia’s Energy and Finance Institute says this stalemate could drag on for months.
"In the short term, I don’t see any major disruptions taking place, partly because Ukrainians in recent periods have increased their gas supplies in storage so they have a bit of a reserve to withstand cuts in supply in the near term. If this goes on for longer then clearly this may become more of an issue." Yaroslav Lissovolik, chief economist with Deutsche Bank, said.
According to Ukrainian officials, Moscow also halted all imports of Ukrainian agricultural products.