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 In eastern Ukraine, where groups of pro-Russian activists have
been emboldened by the Kremlin's annexation of the Crimean
Peninsula, a band of armed men in mismatched camouflage outfits
seized a police station in the town of Slaviansk.
Russia and Ukraine have been locked in confrontation since protests
in Kiev forced the Moscow-backed president from office, and the
Kremlin sent troops into Crimea. Now, the gas dispute threatens to
spread the impact across Europe.
A large proportion of the natural gas which EU states buy from
Russia is pumped via Ukrainian territory, so if Russia makes good on
a threat to cut off Ukraine for non-payment of its bills, customers
further west will have supplies disrupted.
Andriy Kobolev, chief executive of Ukraine's state-run energy
company Naftogaz, said the increased price Russia was demanding for
its gas was unjustified and unacceptable.
"Accordingly, we have suspended payments for the period of the price
negotiations," Kobolev was quoted as saying in an interview with
Ukraine's Zerkalo Nedely newspaper.
In fact, Ukraine has de facto stopped payments already because it
failed to make an installment of over $500 million due earlier this
month to Russian state gas giant Gazprom.
But the decision to formally suspend payments shows there is no sign
of a compromise with Moscow, and may push the two sides closer to a
repeat of past "gas wars", when Ukraine's gas was cut off, with a
knock-on effect on supplies to EU states.
Kiev and Brussels have been scrambling to blunt the impact of any
decision by Moscow to cut off gas to Ukraine.
In particular, they are working out ways to keep supplies flowing to
EU states, and for those countries to then pump the gas to Ukraine
by reversing the flow in their pipelines.
Moscow says it does not want to turn off Ukraine's gas if it can be
avoided, and that it will honor all commitments to supply its EU
customers. Gazprom could not immediately be reached for comment on
Saturday.
ARMED MEN
The dispute over Ukraine, precipitated by the overthrow of Ukrainian
president Viktor Yanukovich after he rejected closer ties to the EU,
has brought Russia's relations with the West to their most fraught
state since the end of the Cold War in 1991.
In Slaviansk, masked men armed with pistols and rifles stood guard
near the police station as hundreds of locals gathered around, some
building barricades with car tires, according to a Reuters
photographer on the scene.
They were wearing orange and black ribbons, a symbol of the Soviet
victory in World War II that has been adopted by pro-Russian
separatists in Ukraine.
Slaviansk is in the Donetsk region about 150 km (90 miles) from the
Russia-Ukraine border. Pro-Russian groups have also occupied public
buildings in the cities of Donetsk and Luhansk, and are demanding
autonomy from Kiev.
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Officials in Kiev's Western-leaning interim government say Russian
forces may be preparing to cross the frontier into Ukraine on the
pretext of protecting the pro-Russian activists from persecution,
though Moscow denies this.
Ukrainian Interior Minister Arsen Avakov said police would deal very
firmly with the group in Slaviansk. "There is a difference between
protesters and terrorists," he wrote on his Facebook page.
Earlier on Saturday in the nearby city of Donetsk, a group of young
people armed with wooden bats briefly took over a floor of the
general prosecutor's office. They later left after talks, Donetsk
police said in a statement.
Ukrainian Foreign Minister Andrii Deshchytsia said Kiev was ready to
listen to the demands of protesters in eastern Ukraine, but if
negotiations fail, the police were ready to act.
"We do consider that these actions are inspired and prepared in
Russia and encouraged by some of the Russia agents in Ukraine," he
told BBC radio.
SCOFFING AT SANCTIONS
The EU and the United States imposed sanctions on Russian officials
and leading business figures in response to Moscow's annexation of
Crimea, which is home to Russia's Black Sea fleet and was part of
Russia until 1954.
Moscow has so far scoffed at the Western measures and warned that,
in the long run, the EU and Washington will come off worse by losing
out on trade with Russia.
Gennady Timchenko, a billionaire oil and gas trader who is on the
U.S. list of people subject to asset freezes and visa bans, joined
the chorus of Russian defiance.
"The fact that I was included in the list was a little surprising
maybe, but it was quite an honor for me," he said in an interview
with the state-run Rossiya television station to be broadcast later
on Saturday.
He said growing volumes of Russian natural gas would be sold to
Asia, as part of a strategy of turning away from a Europe which the
Kremlin considers unfriendly.
"It seems to me they (the Europeans) just don't understand. The
politicians are behaving ... in a very shortsighted way."
(Additional reporting by Alexei Anishchuk and Alessandra Prentice in
Moscow, William Schomberg in London, Lina Kushch in Donetsk, Ukraine
and Gleb Garanich in Slaviansk, Ukraine; writing by Christian Lowe;
editing by Mark Heinrich)
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