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July 1, 2015

Russia's Gazprom Shuts Off Gas To Ukraine

Sputnik News, a Russian based international multimedia news service that is wholly owned and operated by the Russian government stated in a report on Wednesday that the energy giant Gazprom OAO (OTC: OGZPY) has "shut the valves for gas delivers to Ukraine."

According to the report, Gazprom will halt deliveries to Ukraine until Kiev makes a prepayment. The stock, which trades on the OTC market in the U.S., is down more than 1 percent on Wednesday morning. Shares closed down about half that on the MCX exchange earlier.

Gazprom's CEO Alexi Miller was quoted as saying, "Ukraine has not made a prepayment for gas deliveries for July. As of 10:00 this morning, July 1, Gazprom has halted gas deliveries. Gazprom will not deliver any gas to Ukraine at any price until there is a prepayment."

Ukraine's Energy Minister Volodymyr Demchyshyn's rejected Gazprom's gas price offer of $247 per 1,000 cubic meters. The government offered Gazprom $100 per 1,000 cubic meters as part of a package deal that was initially devised to last Ukraine through the winter season and was prolonged in April for three months.

The European Union acts as a mediator in Vienna and has forged a series of temporary agreements to be renewed every three months.

The Russian government maintains a position that its offer $247 per 1,000 cubic meters already represents a discount compared to the global market price.

The announcement also comes a day after Ukraine's state energy firm Naftogaz said it was suspending gas purchases from Russia.

According to a BBC report, Naftogaz said on Tuesday, "Since the additional agreement between Naftogaz and Gazprom is expiring on 30 June, and the terms of further Russian gas deliveries to Ukraine were not agreed at today's trilateral talks in Vienna, Naftogaz is suspending purchases from the Russian company."

Russia previously cut off gas supplies to Ukraine in June 2014 as the conflict between Ukraine and pro-Russian rebels in Eastern Ukraine escalated.

The Market Vector Russia ETF Trust (NYSE: RSX) (an exchange traded fund that replicates the price and yield performance of the DAXglobal Russia+ Index) were trading lower by 1.09 percent at $18.08 shortly after the opening of trading in New York.

This story was originally published by Benzinga
© 2015 Benzinga.com. Benzinga does not provide investment advice. All rights reserved.

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