Russia threatens to cut off Ukraine gas from June 3

Russia's state gas giant Gazprom warned on Monday it may haltshipments to Ukraine on June 3 in a repeat of previous energy wars that hit Europe.Gazprom chief executive Alexei Miller said Russia's crisis-torn neighbour must payupfront for its June deliveries because of debts totalling $3.51 billion (2.55 billioneuros). Kiev had until the morning of June 3 to make the payment "or Ukraine will receivezero cubic metres (of gas) in June," he added.Miller's comments -- made during a meeting with Russian Prime Minister DmitryMedvedev -- marked a sharp escalation in a trade war that European Union officialshave urgently tried to avert without success. Ukraine has refused to cover its obligations in protest over Moscow's decision tonearly double the price it charges Kiev for gas imports following the Februaryoverthrow of its Kremlin-backed regime.Nearly 15 percent of all gas consumed in Europe is delivered from Russia viaUkraine.The danger for EU nations is that Ukraine -- its state coffers effectively empty andalmost completely reliant on $17 billion promised by the International MonetaryFund -- will not cover its debt and instead start taking the gas Russia had earmarkedfor its European clients.The nation of 46 million began dipping into supplies meant for Europe when it wascut off from Russian gas during previous price disputes in 2006 and 2009.Miller's comments came shortly after Russia's deputy energy minister stepped up the rhetoric by noting that Moscow saw no point in discussing the dispute until Kievbegan paying its debts."We are saying that in order to discuss any sort of compromise, the debts must bepaid first," news agencies quoted Russia's Deputy Energy Minister Anatoly Yanovskyas saying."Pay the debts and then we can agree on something." Russia's prime minister noted that Kiev could simply dip into its IMF aid packageand questioned Ukraine's refusal to do so until now."Our Ukrainian partners have the money," news agencies quoted Medvedev assaying."According to our information, Ukraine has received money from the first IMFtranche."Ukraine's Finance Minister Oleksandr Shlapak said earlier on Monday that Kiev waswilling to cover its outstanding payment to Moscow as soon as Russia lowered itsprice.Shlapak told reporters in Kiev that Ukraine was prepared to issue bonds worth $2.16 billion to cover its gas arrears."If Russia extends the old price of $268 per 1,000 cubic metres through the end of the year, we will immediately cover the debt," the UNIAN news agency quotedShlapak as saying.Gazprom now charges Ukraine $485.50 per 1,000 cubic metres -- the highest rate ofany of its European clients.Medvedev received Miller and Russian Energy Minister Alexander Novak momentsafter their return from what appears to have been a failed round of talks on thecrisis with EU and Kiev officials in Brussels.The first round of negotiations conducted in Warsaw last week had resulted in anagreement for Russia to maintain its deliveries while the talks continued.