Ukraine-Russia Gas negotiations
Gazprom's CEO Alexei Miller arrives for talks with Ukraine's Energy Minister Yuri Prodan (L) in Kiev on June 15, 2014. Reuters/Andrew Kravchenko

Russia announced Monday that it would cut off the supply of gas to Ukraine from state-owned Gazprom, as the dispute between the two over unsettled bills continued to rankle.

Ukraine reached its deadline Monday to pay a part of its $4.5 billion debt that it owes Russia without Kiev honoring the debt after both countries met over the weekend and failed to agree on the price of gas. Russia has demanded a rate of $385 for 1,000 cubic meters of gas while Ukraine has proposed to buy it at a rate of $326. As talks between the countries fell through, Gazprom and Ukraine's state-owned Naftogaz sued each other in a Stockholm arbitration court.

“Nothing has been paid,” Sergey Kupriyanov, Gazprom’s spokesperson told media in Moscow, The Washington Post reported, adding: “The decision was made due to Naftogaz Ukraine's chronic nonpayment.”

Although Kupriyanov said that the supply of gas to Europe would continue through Ukraine, he also warned the European Commission that there might be a shortage if Ukraine chose to divert Europe-bound gas for its own use.

“The gas for European consumers is being delivered at full volume and Naftogaz Ukraine is required to transit it," Kupriyanov said, according to Reuters.

Ukraine reportedly said that it has decided not to clear its debts at all, as a sign of protest against the higher prices demanded by Russia, BBC reported, adding that Kiev was willing to repay $1.95 billion if Russia cut the price of its gas to $326 per 1,000 cubic meters. Russia reportedly denied the offer and has stuck to its price of $385.

The lawsuit in the Stockholm court involves Gazprom demanding that Naftogaz pay off its pending bills as well as make advance payments for future delivery while Ukraine’s state-owned gas company seeks to recover $6 billion, which it claims are overpayments it has made over the years. The dispute between the two could have far-reaching consequences as Russia supplies nearly 15 percent of the total gas consumed by Europe.

Meanwhile, violence in eastern Ukraine continued as pro-Russian separatists clashed with the Ukrainian military. Moscow supporters, who want to secede from Ukraine, shot down a Ukrainian military plane on Saturday, killing all 49 troops on board, following which the Russian embassy in Kiev saw heavy protests throughout the weekend.