UPDATE 4-Russia, Ukraine to resume gas dispute talks on Wednesday

Tue Jun 10, 2014 4:38pm EDT

* Gas a key part of relations between Russia, Ukraine and EU

* Tuesday deadline passed, talks to continue on Wednesday

* Russia offers to scrap gas exports duty (Updates with delayed start of talks, changes dateline to Brussels)

By Barbara Lewis and Anna Nicolaou

BRUSSELS, June 10 (Reuters) - Russia and Ukraine will resume efforts to resolve a gas pricing dispute on Wednesday after a Russian deadline for Kiev to pay some of its debts passed without Moscow cutting off supplies.

The gas dispute is at the heart of a crisis between Russia and Ukraine, and failing to resolve it would set back peace moves that are gaining momentum after weeks of violence in eastern Ukraine.

Russia had given Ukraine until 0600 GMT on Tuesday to pay some of the billions of dollars it owes, but pulled back from the deadline after officials said talks brokered by the European Commission would continue.

Eight hours of negotiations in Brussels, which ended around 3 a.m. (0100 GMT) on Tuesday, failed to overcome differences over pricing.

The plan was to resume talks late on Tuesday, but the Commission said that had been pushed back to 9:30 a.m. on Wednesday because the Russian delegation had flown back to Moscow to consult President Vladimir Putin and their return flight to Brussels had been delayed.

After annexing Crimea in March following the overthrow of Ukraine's Moscow-leaning president, and facing unpredictable events in eastern Ukraine, Putin has reason to reduce tensions.

Ukraine last week paid off a chunk of its debt, but talks have stalled on the gas price, threatening possible supply disruptions to the European Union, which gets about a third of its gas imports from Russia, almost half of it via Ukraine.

A source at Gazprom said Russia was supplying Ukraine with the usual volumes of gas.

"Ukraine has been taking 112-115 million cubic metres a day, at a peak, as it pumps gas into storage facilities. Transit to Europe remains stable, at 200 million cubic metres per day," the source said.

Talks between Russia, Ukraine and the European Commission have been going on while Kiev, Moscow and the Organization for Security and Cooperation in Europe discuss peace proposals put forward by Ukraine's new president, Petro Poroshenko.

Those talks have produced what Kiev says is a mutual understanding on key aspects of the peace plan, intended to end an insurrection by separatist rebels who want parts of Russian-speaking eastern Ukraine to join with Russia.

DISAGREEMENT ON PRICE MECHANISM

The talks that ended early on Tuesday faltered over the price Moscow would charge Kiev in future.

Ukraine wants to change the 2009 contract that locked it into buying a set volume of gas, whether it needs it or not, at $485 per 1,000 cubic metres - the highest price paid by any customer in Europe.

Moscow dropped the price to $268.50 after Ukraine's then-President Viktor Yanukovich turned his back on a trade and association agreement with the European Union last year, but reinstated the original price after he was ousted in February.

Speaking after Tuesday's talks, Ukrainian Energy Minister Yuri Prodan said he objected to a Russian price mechanism proposal, which would link lower prices to an export duty.

Russia has floated the idea of scrapping its export duty for gas exports to Ukraine - $100 per 1,000 cubic metres, introduced after Moscow annexed Crimea - to reduce the price.

Russian Energy Minister Alexander Novak said on Tuesday he had proposed "a very constructive plan, which we believe all stakeholders could and should accept".

Moscow has said Ukraine must pay some of its debt before it can talk about price. Kiev paid off $786 million of its debts in late May and Russian officials have suggested it could pay $1.45 billion to cover gas it received last November and December, and a further $500 million as a part of a bill for April and May deliveries. (Additional reporting by Vladimir Soldatkin and Denis Pinchuk in Moscow and Pavel Polityuk in Kiev; Editing by Elizabeth Piper and Robin Pomeroy)