KIEV, Feb. 7 – Russian natural gas monopoly Gazprom warned Thursday it may cut gas supplies to Ukraine on Monday unless steps are taken to clear gas debts it estimated at $1.5 billion.

The warning comes amid rapidly worsening relations between Ukraine and RosUkrEnergo, a Gazprom-controlled gas trader that has been the only gas supplier to Ukraine since its creation in 2004.

The European Union, fearing potential gas supply disruptions similar to those two years ago, urged Moscow and Kiev on Thursday to settle their commercial dispute as soon as possible.

“If this situation is not resolved by Monday, Gazprom will have no commercial option but to terminate supplies of additional Russian gas to Ukraine,” Gazprom said in a statement.

Gazprom added “this situation is not expected to have any impact” on Gazprom’s supplies of gas to other customers in Europe. The company said it was in “close contact” with its European customers and the EU and will continue to update them on any developments.

The dispute over gas supplies between Kiev and Moscow accelerated as Prime Minister Yulia Tymoshenko had pushed hard for removing RosUkrEnergo and its Ukrainian subsidiary UkrGaz-Energo for alleged lack of transparency.

In anticipation of the escalation, Tymoshenko has earlier this week ordered the Foreign Ministry and Naftogaz Ukrayiny to reopen as soon as possible talks on direct gas supplies to Ukraine.

Gazprom said the gas debt has rose to $1.5 billion, up from about $1 billion as of January 1, for some 1.5 billion cubic meters of Russian gas its had supplied.

Gazprom explained the rapid debt accumulation by the fact that it wanted to charge Ukraine $314.7 per 1,000 cubic meters, or almost double compared with an earlier agreed price of $179.5 per 1,000 cubic meters.

Gazprom argued it was forced to supply its “more expensive” Russian gas rather than cheaper gas from Turkmen gas as Turkmenistan had cut supplies due to cold weather in the Central Asia.

The rapid debt accumulation underscores an extremely non-transparent gas supply arrangement between Russia and Ukraine that can lead to unexpected and fast rising debts.

The debts are effectively accumulated between three gas companies, including Gazprom and two gas traders that are also de-facto controlled by Gazprom, RosUkrEnergo and UkrGaz-Energo.

The latest example shows Gazprom can quietly change the prices while sending gas to Ukraine, later announcing the two gas traders had simply failed to pay, effectively building gas debts with looming gas supply disruptions.

Oleksandr Turchynov, the first deputy prime minister, said Thursday the development shows why the two middlemen, RosUkrEnergo and UkrGaz-Energo, must be removed from supply scheme.

“This is just another agitation in favor of the government’s suggestion to get rid of the middlemen,” Turchynov said in an interview with Studio 1+1 late Thursday. “There are no direct contracts between Gazprom and Naftogaz.”

In the current supply arrangement, Gazprom buys all gas from Turkmenistan, but then immediately re-sells it to RosUkrEnergo, which moves it across Russia to Ukraine. RosUkrEnergo is then supposed to the gas to UkrGaz-Energo, which should re-sell it to Naftogaz.

Turchynov said the government will address the debt issue in two ways, first eliminating the intermediaries, while at the same time forcing RosUkrEnergo to pay the debt it owed Gazprom.

“I think we will be forcing RosUkrEnergo to pay its debts,” Turchynov said.

Tymoshenko backed that view. “I can’t rule out that RosUkrEnergo moved all the money towards shadow sector and had failed to pay Russia,” she said after arriving to Kiev late Thursday from a business trip to Odessa. She assured Ukrainian consumers and the EU that no gas disruptions should be expected.

“Ukraine has all required resources to provide gas to Ukraine and to prevent even elementary destabilization of gas transit to Europe,” she said. (sb/ez)