Russia tells Ukraine to pay gas debt or supplies may halt

Ukraine says it is prepared to issue bonds worth $2.16bn to address its gas arrears

Russia's state energy giant Gazprom has said it may halt natural gas shipments to Ukraine on 3 June unless the country pays in advance for supplies.

Gazprom boss Alexei Miller said the move was because of outstanding debts.

If there is no payment by the deadline then "Ukraine will receive zero cubic metres [of gas] in June," Russian news agency Interfax reported.

And Prime Minster Dmitry Medvedev said on Russian TV saying they could no longer "nanny" Ukraine.

IMF money

Mr Miller said Ukraine must pay in advance for its June deliveries because of debts amounting to $3.51bn (2.55bn euros; £2.1bn).

His comments were made during a meeting with Mr Medvedev.

The Russian president said that Kiev could dip into its IMF aid package and questioned Ukraine's refusal to do so until now.

"According to our information, Ukraine has received money from the first IMF tranche," he said.

Ukraine has refused to cover its obligations in protest over Moscow's decision to nearly double the price it charges Kiev for gas imports.

Ukraine's Finance Minister Oleksandr Shlapak had earlier said on Monday that the county was willing to cover its outstanding payment as soon as Russia lowered its price.

'Old price'

He said Ukraine was prepared to issue bonds worth $2.16bn to address its gas arrears.

"If Russia extends the old price of $268 per 1,000 cubic metres [until] the end of the year, we will immediately cover the debt," the UNIAN news agency quoted Mr Shlapak as saying.

Gazprom now charges Ukraine $485.50 per 1,000 cubic metres - the highest rate of any of its European clients.

Close to 15% of all gas consumed in Europe is delivered from Russia through Ukraine.

There is a danger for EU nations that Ukraine will start taking the gas Russia had earmarked for its European clients, something it did when it was cut off from Russian gas during previous disputes in 2006 and 2009.