KIEV, Ukraine -- Ukraine must pay in advance for Russian gas supplies starting next month, Russian President Vladimir Putin said Thursday, raising pressure on the struggling neighbor as Moscow voiced dismay over what it says is Ukraine's reluctance to implement an international peace plan.
Putin said in a letter to European leaders that Ukraine's debt for Russian gas supplies has reached $3.5 billion, and because of its refusal to pay Moscow, it will have to switch to prepaid gas deliveries starting June 1.
The Russian president first warned of the move in April in a letter to European leaders, whose nations are customers of Russian state-controlled Gazprom natural-gas giant. Ukraine serves as a major conduit for Russian gas supplies to Europe, and pricing disputes have led to shutdowns in the past.
Putin said gas talks involving Russia, Ukraine and the European Union have failed to reach a compromise and pointed at Ukraine's refusal to pay even though it has received a $3.2 billion bailout from the International Monetary Fund.
Ukraine has said it will pay if Moscow restores the price discounts canceled after the toppling of pro-Russian President Viktor Yanukovych in February after months of protests.
Russia denounced Yanukovych's ouster as a coup and quickly sent its troops to take over Ukraine's Black Sea peninsula of Crimea, which it annexed weeks later.
In April, a mutiny broke out in Ukraine's east, where pro-Russia insurgents seized government buildings and have been fighting government troops. Many in the east see the new government in Kiev as nationalists bent on repressing Russian speakers.
The insurgents in the Donetsk and Luhansk regions declared independence after a referendum Sunday, which was rejected as a sham by Ukraine's government and the West. Those in Donetsk asked to join Russia, but the Kremlin has said it has no intention of annexing the region and hopes to negotiate a settlement to the crisis.
The insurgents in Donetsk on Thursday announced the creation of their own parliament and Cabinet. They appointed as defense minister Igor Strelkov, the leader of the insurgents' armed wing, who Kiev says is a Russian intelligence officer.
"A civil war is underway, and it's important for us to create a power bloc to successfully fight the Kiev junta," said Yelena Korovkina, a member of the self-proclaimed parliament.
Kiev and the West have accused Russia of fomenting the unrest, which Moscow denies. The U.S. and European Union have imposed economic sanctions on Russia.
Secretary of State John Kerry said Thursday that if Moscow or its proxies disrupt Ukraine's May 25 presidential election, the U.S. and Europe will move to impose heavier sanctions.
A senior State Department official said the U.S. strategy would be to use a "scalpel rather than a hammer" to target vulnerabilities in Russia's business, banking, mining, energy, defense or other sectors. The official, who was not authorized to speak by name about the discussions in London, spoke on condition of anonymity.
"Let me emphasize, our hope is not to do this," Kerry said. "I say to the Russians and everybody, our hope is to de-escalate."
Moscow supported a Swiss-brokered peace plan, which calls for ending hostilities and giving amnesty to the rebels and urges a nationwide dialogue between the government and its foes on decentralization and the status of the Russian language. Ukraine has remained cool to the initiative, saying it fails to require any Russian action to de-escalate the crisis.
The first session of a meeting intended to jump-start the dialogue was held Wednesday in Kiev, but the government has refused to invite representatives of the insurgents in the east, saying it wouldn't talk to "terrorists."
The next round of talks is expected Saturday.
Insurgents from eastern Ukraine said they hadn't been invited to the Kiev meeting and said talks should be held in Donetsk. Denis Pushilin, speaker of the self-declared insurgent parliament, said it should focus on a prisoner exchange and the pullout of government forces, whom he called "occupation troops."
In Moscow, Russian Foreign Ministry spokesman Alexander Lukashevich criticized what he called a "stubborn reluctance of the authorities in Kiev to launch a real process of national reconciliation."
Also on Thursday, Ukraine's acting president, Oleksandr Turchynov, claimed the Ukrainian army destroyed an insurgent base in the city of Slovyansk and another one in nearby Kramatorsk, about 95 miles west of the Russian border.
Ukraine's defense ministry said there were no casualties while the army took three insurgents captive, including one who was armed with a rocket-propelled grenade launcher.
Information for this article was contributed by Yuras Karmanau, Alexander Zemlianichenko and Deb Riechmann of The Associated Press.
A Section on 05/16/2014