Russian, Ukrainian gas talks collapse

VIENNA, July 1 (UPI) -- European leaders said they'd get to work on proposing new strategies after natural gas talks between Russia and Ukraine collapsed in Vienna.

European Commission Vice President Maros Sefcovic met in Vienna with Russian Energy Minister Alexander Novak, his Ukrainian counterpart, Vladimir Demchyshyn and Andriy Kobolev, the chief executive officer at Ukrainian energy company Naftogaz.

The energy relationship between Ukraine and Russia has been strained at least since 2006, when Ukrainian debt issues prompted Russian energy company Gazprom to cut gas supplies through Ukraine.

The European economy gets about a quarter of its natural gas from Russia, though most of that runs through the Soviet-era pipeline network in Ukraine. The European Commission has acted as a mediator to bilateral talks that began in March.

The Kremlin opted to keep prices for Ukraine unchanged from the second quarter, which included a $40 discount per 1,000 cubic meters purchased. Russian Energy Minister Alexander Novak said Wednesday anything more in terms of discount expectations from Ukraine was "completely groundless."

Naftogaz said it would stop purchasing gas from Russia until a new arrangement is brokered, though supplies to the European market would continue. Gas purchases from Russia are already down by more than 50 percent.

Sefcovic said all parties to the negotiations are, at least in principle, in agreement that gas to Ukraine and Europe should be stable, though all sides are still far apart.

"We have agreed that the commission will put forward ideas to prepare next steps so that the next consultation could take place," he said in a statement. "We will use the summer to start preparing the next winter season."