Gas only for cash, Russia's Gazprom tells Ukraine

Russian energy giant Gazprom today said it will only deliver gas to Ukraine upon pre-payment, after a deadline for arrears payment expired.

''Today at 10 am Moscow time (0600 GMT) Gazprom in full accordance with contractual obligations, switched to pre-payment gas deliveries for Naftogaz Ukraine,'' the company said in a statement.

It added that the decision was based on the Ukrainian gas provider's ''chronic non-payment''.

Gazprom said on Saturday it would not extend the deadline for Ukraine to start paying off its gas debts, raising fears of an energy crisis. Russia says Ukraine owes it around $4.5 billion in gas bills.

Ukraine wants to pay $268.5 per 1,000 cubic meters of gas - the price it had been offered when pro-Russian Viktor Yanukovich was in power - but, in a compromise last week, said it would agree to pay $326 for an interim period until a lasting deal was reached.

Moscow had been seeking $485 - the price it reverted to after Yanukovich was toppled - but offered to remove export duty, a move that would reduce the price to $385, around the average amount paid by Russia's European clients.

The EU gets about a third of its gas needs from Russia and around half of this is received through pipelines that cross Ukraine. It suffered serious disruptions in supplies during an earlier "gas war" in 2009. (See: EU worried as Russia threatens to close gas-supply tap to Ukraine).