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New Russia-Ukraine gas talks as deadline looms

Energy chiefs from Moscow, Kiev and the EU were set to meet in Berlin on Friday to resolve a bitter standoff days before Russia threatens to cut off gas to Ukraine.

BERLIN: Energy chiefs from Moscow, Kiev and the EU were set to meet in Berlin on Friday to resolve a bitter standoff days before Russia threatens to cut off gas to Ukraine.

Tensions are high after two failed meetings and as pro-Russian rebels in eastern Ukraine continue to fight to split away from the rest of the former Soviet republic.

EU Energy Commissioner Guenther Oettinger has mediated in the dispute, in which Russian energy giant Gazprom demands billions of euros in back and advance payments from cash-strapped Ukraine.

Ukraine's Western-leaning government this week rejected a compromise deal proposed by Oettinger on Monday, setting the stage for more tense haggling ahead of the Tuesday, June 3 deadline.

The dispute worries Europe, which depends upon Russia for about a quarter of the natural gas it consumes, and roughly half of Russian imports flow through Ukraine.

Previous disruptions in 2006 and 2009 prompted Brussels to seek ways to diversify supplies.

Oettinger, speaking to Germany's Die Welt daily, said the EU must ensure it has enough gas supplies for next winter -- by topping up its half-full reserve tanks, improving its pipeline infrastructure and boosting energy efficiency.

The newspaper said an EU study had found that a worst-case scenario, a total halt of Russian gas during peak demand in January, "would directly affect almost the entire EU with the exception of the Iberian Peninsula and southern France".

The EU commissioner urged a long-term energy security strategy -- the subject of an EU summit in June -- saying that "we must ensure that we can't be politically or commercially blackmailed".

Russia and Ukraine launched their third gas war in less than a decade after the ouster of a Kremlin-backed president in February and Ukraine's decision to seek closer economic ties with EU states.

Russia hiked Ukraine's gas price by 81 per cent to US$485.50 per 1,000 cubic metres -- the highest in Europe.

It also demanded a payment by next Monday of US$5.17 billion (3.79 million euros) for debts and June deliveries.

Ukraine branded the price increase a form of "economic aggression".

On Monday, Oettinger had suggested a way forward after meeting Russian Energy Minister Alexander Novak and his Ukrainian counterpart Yuriy Prodan.

Under the roadmap, which has since been rejected by Kiev, Ukraine would have paid US$2.0 billion by Thursday.

Both sides would have then talked about lowering future prices, followed by a US$500 million payment to Moscow on June 7.

Ukraine, where a new president was elected on Sunday, said it first wanted an assurance that the gas price will fall.

"What we are hearing now is 'you pay and then we talk'," said Finance Minister Oleksandr Shlapak on Tuesday. "This does not suit us."

Ukrainian Prime Minister Arseniy Yatsenyuk stressed that Russia had broken all conventions by seizing its Black Sea peninsula of Crimea in March.

Crimean waters contain largely-untapped natural gas fields. Yatsenyuk put their value at US$1 billion and said he expected compensation from Russia for them.

"If we want fairness, then we should have an honest and fair discussion," said Yatsenyuk. "But Russia seems to have its own view of justice."

A press conference was scheduled for around 1500 GMT on Friday.

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