Ukraine-Russia gas talks go to the wire as relations worsen

Ukraine planned to hold emergency energy talks with Russia last night, amid worsening relations between the countries after dozens of Ukrainian troops were killed by rebels who Kiev and the West claim are armed by Moscow.

The EU-brokered talks were set to resume ahead of today’s deadline for Ukraine to pay at least $1.95 billion (€1.44 billion) in outstanding bills – something Kiev refused to do without agreement on a lower gas price than Moscow has been willing to offer.

The neighbours have threatened to sue each other over the disagreement, which echoes previous disputes that resulted in disruption to gas supply to EU states.

The bloc relies on Russian gas pumped across Ukraine for about 15 per cent of its total gas needs.

Russia offered Ukraine's Kremlin-backed president Viktor Yanukovich a big gas discount after he rejected a major EU agreement last November, and later doubled the energy price for Kiev when he was replaced by pro-western leaders.

Annexation

After Mr Yanukovich and his entourage fled to Russia in February, it annexed Ukraine’s Black Sea peninsula of Crimea, and pro-Moscow rebels in the eastern Donetsk and Luhansk regions seized official buildings, held an independence referendum and appealed to the Kremlin to take them under its control.

Early on Saturday morning the insurgents shot down a transport plane carrying Ukrainian paratroopers as it approached Luhansk airport.

The attack killed 49 servicemen and crew, in the worst single loss of life for government forces since they launched an “anti-terrorist” operation against the rebels in Donetsk and Luhansk, where ties to Russia are strong and suspicion of Kiev’s new pro-western government runs deep.

Border guards

Also on Saturday, rebels killed five border guards and wounded seven in the Donetsk-region port of Mariupol.

“We condemn the shooting down of the Ukrainian military plane and continue to be deeply concerned about the situation in eastern Ukraine, including by the fact that militant and separatist groups have received heavy weapons from Russia, including tanks, which is a significant escalation,” said a White House spokeswoman.

The US and EU have threatened to impose sanctions on entire sectors of Russia's economy if it continues to destabilise eastern Ukraine, where the rebels have been strengthened by Russian fighters and advanced Russian weapons.

German chancellor Angela Merkel and French president François Hollande expressed "extreme concern" over the violence in Ukraine in a joint telephone conversation with Russian president Vladimir Putin.

Moscow denies giving help to the insurgents, and calls for Kiev to halt a crackdown that has killed more than 200 people, including civilians, and to start talks with representatives of the restive regions.

Relations between Ukraine and Russia continue to deteriorate, and on Saturday protesters smashed windows at Moscow’s embassy in Kiev and overturned diplomatic cars.