Ukraine must pay cash for gas, says Russia's Putin

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

Russian President Vladimir Putin has said his country will demand payment in advance for gas supplies to Ukraine starting from 1 June.

In an open letter to European leaders, Mr Putin said Ukraine now owed Russia $3.5bn (2.55bn euros; £2.1bn) for gas already delivered.

He said Russia remained open to consultations, but the EU had failed to come up with specific solutions.

Mr Putin's letter follows similar comments by Gazprom boss Alexei Miller.

Mr Miller said on Monday that the state energy giant could halt natural gas shipments to Ukraine on 3 June unless the country pays in advance for supplies.

"Given the circumstances, the Russian company has issued an advance invoice for gas deliveries to Ukraine, which is completely in accordance with the contract, and after June 1 gas deliveries will be limited to the amount prepaid by the Ukrainian company,'' Mr Putin said in his letter, which was released by the Kremlin on Thursday.

Higher charges

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, said on Monday that his country was willing to cover its outstanding payment as soon as Russia lowered its 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.