Russia ready for gas talks with Ukraine, warns of disruptions

By Katya Golubkova and Denis Pinchuk MOSCOW (Reuters) - Russia is ready for talks on resuming gas supplies to Ukraine, Energy Minister Alexander Novak said on Friday, warning of disruption to flows to Europe this winter if a row over pricing and debts is not resolved. Novak said Moscow was ready to reduce its prices in an effort to secure a deal, but the proposed sum remained well above what Kiev has said it is willing to pay. The dispute comes amid escalating tensions between the two countries, with Ukraine accusing Russia of sending weapons and men to help a separatist rebellion in the east of the country -- an accusation Moscow rejects. Russian President Vladimir Putin agreed last year to cut the gas price for Ukraine to $268.50 per 1,000 cubic meters after then-Ukrainian President Viktor Yanukovich said he would snub the European Union in favor of closer ties with Russia. But Yanukovich was toppled by mass protests in February, and Moscow hiked the price to $485. This was rejected by Kiev, and Russia cut off the gas flow in June after the two sides failed to resolve their commercial dispute. Novak said after meeting European Energy Commissioner Guenther Oettinger that Russia was ready to apply a retroactive discount, bringing the price per 1,000 cubic meters for April-June to $385. Ukraine has said it wants to return to the old price, while signaling it might agree to pay just above $300. Ukrainian Energy Minister Yuri Prodan said Kiev was disappointed by the "lack of constructive approach" from Russia on gas talks. "We hear again about the price of $385 ... due to a cancellation of fees. It, as the Russian side (would) think, means that the price of $485 is fair and market. We think that this price is discriminatory," Prodan said in a statement. Oettinger's spokeswoman said a repayment plan should be developed over the next weeks for all the gas that has not been paid for as part of an interim solution. Gazprom has signaled it may resume gas supplies once Ukraine pays off 2013 gas debts, which it put at $1.45 billion. The Russian gas exporter says Ukraine owes it a total of more than $5 billion in unpaid bills. Regardless of the fallout over the conflict in eastern Ukraine, Novak said Moscow was prepared for new gas talks. "We will agree the date for a trilateral meeting at the beginning of next week," he said. Oettinger told Reuters he expected discussions to resume by mid-September. SIPHONING OFF Despite the cut-off to Ukraine, Russian gas has been flowing normally across the country to Europe, which receives about half its imports of Russian gas via this route. However, Novak said Kiev might start siphoning off some of this gas in the coming winter if it fails to build its reserves. He said Ukraine had stockpiled up to 16 billion cubic meters, but needed to pump as much as 10 billion more into storage. Prodan described the charges on siphoning as "groundless". Various meetings, including talks between Putin and Ukrainian President Petro Poroshenko earlier this week, have so far failed to bear any tangible fruits over the gas issue, and time is running short before winter sets in. Russian gas supplies to Europe were interrupted at the height of winter in 2006 and 2009. Southern Europe, which depends on Russia for almost all its gas, was hit the hardest. Gazprom provides around a third of Europe's gas. Last year, it covered around half of Ukraine's gas consumption. Oettinger said gas must not be used as a weapon in the Ukraine-Russia crisis, adding that all sides needed to work out an interim solution, given that international arbitration would not be able to resolve the dispute before the middle of 2015. "We always said through the crisis that we don't see the gas sector as a tool for sanctions, measures and escalations. That is also true today," Oettinger said. (Additional reporting by Vladimir Soldatkin in Moscow, Barbara Lewis and Robert Jan Bartune in Brussels and Pavel Polityuk in Kiev; Editing by Crispian Balmer and Jane Baird)