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Russia-Ukraine gas talks to go on after Kiev makes payment

Kiev has sent a first gas payment to Moscow, paving the way for further talks next week to avert a Russian gas shutdown to Ukraine, negotiators said Friday.

“We don’t have a final deal yet but we have made progress,” EU Energy Commissioner Guenther Oettinger said after mediating between Russian Energy Minister Alexander Novak and his Ukrainian counterpart Yuriy Prodan, as well as the CEOs of both national energy companies.

The Berlin talks were the third Russia-Ukraine meeting aiming to resolve a bitter standoff between Moscow and its former Soviet satellite, held before a deadline next Tuesday when Russia had threatened to cut off gas to Ukraine.

Amid the Ukraine crisis, Russia’s energy giant Gazprom has raised gas prices and demanded $5.17 billion (3.79 million euros) from the crisis-hit and cash-strapped country for past gas shipments and June deliveries.

Oettinger said Ukraine’s Naftogaz had now reported transferring an initial payment of $786 million dollars via a New York bank to Gazprom for February and March debts, and that talks were set to continue in Brussels Monday after the money arrives.

“The Russian partners are ready to continue talks on this basis,” Oettinger told a press conference.

Prodan added that “we are sure that the funds paid by us will arrive on Monday”.

Russia’s Novak said “we are very constructively minded and hope our partners are too”, adding that “we have begun discussions on financial aid that the EU can bring to Ukraine”.

– Kiev: ‘deal or lawsuit’ –

However, the talks promised to continue being tense amid the bad blood, with Kiev again demanding lower prices for Russian gas.

Prime Minister Arseniy Yatsenyuk said in Kiev that “Ukraine will never accept the price of nearly $500 (per 1,000 cubic metres) and will never purchase gas at this price”.

“There will be a new round of negotiations on Monday,” he told a cabinet meeting. “These negotiations will either end with the signing of an agreement or with us filing a lawsuit.”

Russian Prime Minister Dmitry Medvedev, meanwhile, stressed Moscow wants to see the first payment before it keeps talking.

“An obligation is considered fulfilled — at least partially — not when the money is sent but when it enters the account of the creditor, that of the gas supplier Gazprom,” he said.

“Now we have to make sure that they want to pay. No other way of looking at the situation is possible. When I hear: ‘Give us a different price and then we’ll pay you’ that is impudence,” Medvedev said, according to RIA Novosti news agency. “That’s not how decent partners behave.”

– EU worries –

The dispute has worried Europe, which depends on Russia for about a quarter of the natural gas it consumes, and roughly half of Russian imports flow through Ukraine.

Previous disruptions in 2006 and 2009 prompted Brussels to seek ways to diversify supplies.

Oettinger, speaking earlier to Germany’s Die Welt daily, said the EU must ensure it has enough gas supplies for next winter — by topping up its half-full reserve tanks, improving its pipeline infrastructure and boosting energy efficiency.

The newspaper said an EU study had found that a worst-case scenario, a total halt of Russian gas during peak demand in January, “would directly affect almost the entire EU with the exception of the Iberian Peninsula and southern France”.

The EU commissioner urged a long-term energy security strategy — the subject of an EU summit in June — saying that “we must ensure that we can’t be politically or commercially blackmailed”.

Russia and Ukraine launched their third gas war in less than a decade after the ouster of a Kremlin-backed president in February and Ukraine’s decision to seek closer economic ties with EU states.

Russia hiked Ukraine’s gas price by 81 percent to $485.50 per 1,000 cubic metres — far above the European average.

Yatsenyuk this week stressed that Russia broke all conventions by seizing its Black Sea peninsula of Crimea in March.

Crimean waters contain largely-untapped natural gas fields. Yatsenyuk put their value at $1 billion and said he expected compensation from Russia for them.