* Gas central to relations between Russia, Ukraine and EU
* Gazprom extends payment deadline to June 16
* Ukraine says Russian offer is "a trap"
By Barbara Lewis and Natalia Zinets
BRUSSELS/KIEV June 11 Russia and Ukraine resumed
efforts to settle their gas price row on Wednesday after Kiev
rejected a proposal that would have cut its gas bill by around a
fifth and averted a possible suspension of supplies that would
also hit the rest of Europe.
The dispute is part of a broader stand-off between Ukraine
and its former Soviet master, as Kiev's new West-leaning
leadership struggles to contain a pro-Russian separatist
rebellion in its eastern provinces.
Arguments over the price Russia charges Ukraine for gas have
rumbled on for years and led to supply cut offs in 2006 and
2009. The latest crisis began with the overthrow of Ukraine's
Moscow-leaning president Viktor Yanukovich in February, after
which Moscow annexed its neighbour's Crimea region and nearly
doubled the price it charged Kiev for gas.
Russian gas exporter Gazprom had been charging a
preferential rate as part of Moscow's effort to keep Ukraine
from drifting into the orbit of the European Union.
The European Commission, the EU executive, took on the role
of brokering trilateral price talks after Russian President
Vladimir Putin suggested three-way negotiations, but five rounds
so far have failed to get a deal.
Arriving for Wednesday's talks at the European Commission in
Brussels, EU Russian envoy Vladimir Chizhov hinted that Ukraine
was the obstacle.
"These negotiations stand a good chance of success, but this
particular tango takes three," he said. Asked who was out of
step, he said: "No prizes for guessing."
Ukraine's Prime Minister Arseny Yatseniuk at a cabinet
briefing on Wednesday made clear Ukraine rejected Russia's offer
to lower gas prices by removing export duty, a measure that
would not be written into the contract and was therefore at the
whim of Moscow.
"I want to say that we know these Russian traps; the
discount is set by the Russian government and cancelled by the
Russian government," he said.
Ukraine instead wants to change a 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.
That level is the highest price paid by any customer in
Europe, but a $100 drop would take it into the EU market range.
Negotiators hope that Wednesday's talks between the two
energy ministers, the Commission and the CEOs of Gazprom and
Ukraine's Naftogaz will build on progress over eight hours of
talks that broke up in the early hours of Tuesday morning in
But they are likely to stop short of a full deal after
Gazprom extended until Monday a deadline for Kiev to switch to
prepayment or face a supply cut-off.
If supplies are cut to Kiev, there could be knock-on
disruptions to the European Union as roughly half of the gas it
receives from Russia - about 30 percent of its gas demand - is
shipped via Ukraine.
The talks between Russia, Ukraine and the EC 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, to settle an armed
stand-off in the east.
Those talks have produced what Kiev says is a mutual
understanding on key aspects of the peace plan, intended to end
the insurrection by rebels who want parts of Russian-speaking
eastern Ukraine to join with Russia.
Analysts say resolving the gas row would go a long way to
taking the heat out of the wider conflict.
Moscow dropped Ukraine's gas price from $485 per 1,000 cubic
metres to $268.50 after then-President Viktor Yanukovich turned
his back on a trade and association agreement with the EU last
year, but reinstated the original price after he was ousted.
Since then, Moscow says Ukraine has stacked up more than $4
billion in debts to Gazprom and must pay off some of that before
a new price deal can be reached.
Kiev paid off $786 million at the start of last week but has
since said it will only pay more when an overall deal is struck.
(Additional reporting by Timothy Heritage, Elizabeth Piper and
Vladimir Soldatkin in Moscow; Editing by Will Waterman)