MOSCOW: Ukraine rebuffed a gas price offer from Russia on Wednesday (Thursday in Manila), despite President Vladimir Putin warning that this would escalate the dispute, as key European Union (EU)-mediated talks ended in stalemate the same day.
The high-stakes negotiations in Brussels ended without a deal after five hours of haggling over a bitter gas feud which has seen Moscow threaten to cut supplies to Ukraine.
The talks are being closely watched to see if both sides really want to bring some sort of closure to an unprecedented standoff that began with pro-EU protests in Kiev in November.
If successful, they would build on efforts by Kiev’s new President Petro Poroshenko to bring peace to eastern Ukraine, wracked by separatist violence which has left some 270 dead in two months, according to Ukraine’s health ministry.
However, despite growing optimism among diplomats that the crisis is abating, the two sides dug in on their positions, trading barbs after Wednesday’s talks.
“If our offer is rejected then we will shift to a whole other level,” Putin told a government meeting in Moscow.
“That is not our choice and we do not want that,” he added.
The Russian strongman said Russia was offering Kiev a $100 “discount” for a final price of $385 per 1,000 cubic meters, and accused Kiev of driving the negotiations into a “dead end” by demanding further reductions.
However Ukraine Energy Minister Yuriy Prodan said that Kiev could not accept an offer that could easily be withdrawn if Moscow changed its mind.
Ukraine wanted a price set by the market laid down in a commercial contract, Prodan said, but “unfortunately Russia proposed a way of fixing the price which I would call political.”
Moscow says Kiev owes it $4.5 billion (3.3 billion euros) in outstanding bills but Ukraine has refused to pay in protest at Russia’s decision to nearly double the price in the wake of the February ouster of Kremlin-friendly president Viktor Yanukovych.
Despite the deadlock, EU Energy Commissioner Guenther Oettinger — who is brokering the negotiations — said that in his opinion the talks had established some common ground.
“We are still in negotiations,” he said.
“I can see movement on both sides and both sides will need to continue to move,” Oettinger added.
The latest round of talks began on a positive note after Russian gas giant Gazprom said early on Wednesday that it was delaying by five days a deadline for Ukraine to start paying for gas ahead of time, or risk a cut in its supply.
Hopes were also raised when Putin said in a telephone conversation with German Chancellor Angela Merkel that he had ordered the Russian delegation at the talks to take “a constructive position” in order to reach a “mutually acceptable agreement.”
However, Oettinger said the talks could take some ten days and the mood appeared to sour before the two sides had even reached the negotiating table when Ukraine Prime Minister Arseniy Yatsenyuk attacked Russia for playing “games” over the latest offer.
Analysts have previously said they expect the two sides to agree a price of around $350 (260 euros) per thousand cubic meters of gas, about halfway between the old rate and the one set by Moscow after the ouster of Yanukovych.
About 15 percent of the natural gas that Europe consumes is Russian gas that transits through Ukraine.