All gas supplies to Ukraine from Russia have stopped after the collapse of talks to end a row over unpaid bills and prices.
The taps have been turned off at 0700 GMT, said Gazprom, Russia’s gas giant, when its contract to supply Ukraine ended.
Whereas Ukraine insists it has paid off its debts to Gazprom, Russia contests this. And the two countries have also failed to agree on a price for 2009.
The two countries were urged by the EU to resume negotiations and not to let the dispute disrupt supplies to Europe.
At the beginning of 2006, a similar row between Gazprom and Ukraine led to gas shortages in several EU countries.
About a fifth of the EU’s gas needs come through pipes accross Ukraine.
The Czech Republic, who took the EU presidency on 1 January, urged the parties to “rapidly reach a successful outcome” to their dispute, adding that “all existing commitments to supply and transit must be honoured”.
Russia as well as Ukraine insist that gas supplies transported via Ukraine to the European Union will continue as normal.
“We have fully cut off supplies to Ukraine as of 10am (0700 GMT) today”, said an official at Gazprom’s headquarters in Moscow.
“Usually we supply 390 million cubic metres per day, of which 300 million is transit gas for Europe. Today supplies are running at 300 million cubic metres. We continue supplying Europe in full”, Reuters quoted him as saying.
Supplies have dropped off steadily, confirmed Naftogaz, Ukraine’s state energy firm, saying it would start pumping gas from its reserves.
Ukraine says it has built up enough reserves to see it through the next few months.
Although there was no sign of similar sentiments in Moscow, Ukrainian President Viktor Yushchenko said he was hopeful that negotiations on a new contract would be completed by 7 January, and that the sides were “close to a compromise”.
“The debt to Gazprom for gas supplied earlier was not paid. Despite verbal statements from Kiev, Gazprom did not see any money in its account”, said Gazprom’s chief executive Alexei Miller.
He criticised Ukraine’s stance during the negotiations as “unconstructive”, and said Gazprom had no legal reason to continue supplying gas to Ukraine.
The contract to supply gas depends on the full settlement of $3bn in gas bills and late-payment fines levied by Gazprom, said Mr Miller.
He also suggested that by “forming the impression that there are political forces in Ukraine which are very eager to see a gas conflict between our two countries”, Kiev was seeking to provoke a wider dispute.
Naftogaz said it has paid $1.5bn in outstanding bills to RosUkrEnergo, a Switzerland-registered gas trading company which is acting as an intermediary, but not the fines imposed by Gazprom.
Gazprom is the world’s largest gas producer and supplies a quarter of the European Union’s gas needs and 42% of its imports. Most of that is transported via Ukraine.
Vladimir Putin, Russia’s prime minister, had earlier warned Ukraine not to disrupt the transit of gas to Europe.
He warned of “very severe consequences” for Ukraine in terms of its relations with both Russia and European countries.
Mr Putin also said Gazprom had been generous in offering Ukraine a price of $250 per 1,000 cubic metres of gas in 2009, given that the price in Europe was currently more than $500.
Though he said he understood that Ukraine was in “a difficult economic situation” which was worse than Russia’s, Mr Putin put the dispute down to a “war of the clans” opposing the Ukrainian Prime Minister, Yulia Tymoshenko, and President Viktor Yushchenko.