Ukraine rejects Russia’s gas offer

Russia offered Wednesday to restore the discounted gas prices it granted Ukraine under ousted pro-Russian President Viktor Yanukovych, but Ukraine demanded an even better deal and called for arbitration to settle the dispute.

Speaking in Moscow, Russian President Vladimir Putin said Russia was offering the discount as a "partnership deal." Russia's energy minister, Alexander Novak, specified the price offered as $385 per 1,000 cubic meters of gas.

"We believe that our offer is more than in a partnership spirit, aimed to support the Ukrainian economy at a rather difficult time," Putin said in televised remarks. "But if our offers are rejected it means we will enter another stage. This is not our choice. We do not want it."

Ukrainian Energy Minister Yuri Prodan told Russian news agencies on Wednesday that Kiev found the deal unacceptable, and said Ukraine was seeking a lower price.

Russia and Ukraine have been locked for months in a dispute over the price of Russian gas supplies and Ukraine's debt for previous deliveries. Moscow has threatened to turn off the tap if Ukraine fails to settle the multibillion-dollar debt, but repeatedly pushed back the deadline after Ukraine paid off part of the debt.

The latest round, which began on a more positive note after Russian giant Gazprom extended to Monday a threatened gas cutoff, broke up with all three parties explaining their positions separately, highlighting continued deep differences.

The gas dispute comes amid continuing fighting in eastern Ukraine, where government forces have battled pro-Russian rebels for two months. The insurgents have pushed for joining Russia following Moscow's annexation of Ukraine's Crimean peninsula in March, but Putin has ignored their appeal in an apparent bid to avoid another round of crippling Western sanctions.

Putin has seemed eager to avoid cutting off gas to Ukraine, a move that would likely disrupt shipments to European customers via pipelines crossing the Ukrainian territory, but he also warned Ukraine on Wednesday not to refuse the $385 price on offer.

Ukraine was driving negotiations into a "dead end," Putin said.  

In December, Russia had offered Ukraine an even lower price of $268 as it sought to give a financial lifeline to Yanukovych, who was facing massive protests triggered by his decision to ditch a pact with the European Union and opt for closer ties with Moscow.

But Russia annulled all gas discounts after Yanukovych was ousted in February, bringing the price back to $485 in line with a 2009 contract.

Ukraine has refused to pay for Russian gas, demanding that Moscow lower the price.

EU Energy Commissioner Guenther Oettinger, who is involved in the talks, said he hopes the parties will make progress in the next 48 hours.

"I can see movement on both sides, and both sides will need to continue to move," he told reporters. "There are differences of opinion ... and we're talking about billions."

He said the final price will depend on two factors: the volume of Russian gas purchased by Ukraine and the length of the agreement, which he has suggested should be 15 months. That would be enough to see Ukraine through the winter of 2014–15 and allow it to build up its reserves for another winter.

Wire services