Russia has stopped gas supplies to Ukraine after it missed a bill payment deadline, prompting fears European Union imports will be hit.
State-owned Gazprom said Ukraine's Naftogaz had failed to pay the $1.9bn of its $4.5bn (£2.7bn) debt by the 0600 GMT (0700 BST) deadline set by Moscow and, as a result, the company would have to pay up front for its gas in future.
It also suggested deliveries for June remained uncovered.
Gazprom said: "Today, from 10:00am Moscow time, Gazprom, according to the existing contract, moved Naftogaz to prepayment for gas supplies.
"Starting today, the Ukrainian company will only get the Russian gas it has paid for," it said.
Major gas pipelines to Europe pass through Ukraine A source at Gazprom was quoted by the news agency Reuters as saying that it had now "restricted" supplies while the company filed a lawsuit in Stockholm demanding immediate payment of the full amount.
The EU gets about one third of its gas from Russia and around half of that comes through pipelines that cross Ukraine.
Gazprom said supplies for the EU were still being sent through the country despite the dispute.
Naftogaz boss Andriy Kobolev has failed to agree terms with Russia "The gas for European consumers is being delivered at full volume and Naftogaz Ukraine is required to transit it," Gazprom spokesman Sergei Kupriyanov told reporters.
The developments follow the failure of EU-sponsored talks in Kiev aimed at reaching a settlement between Russia and Ukraine.
The European Commission said it was "convinced" a solution to the bitter dispute was possible, averting a deepening of the wider crisis over Ukraine's future that has seen East/West relations deteriorate to levels not seen since the Cold War.
The EU had proposed a compromise package requiring Ukraine to pay $1bn immediately with the balance settled through six additional payments by the year's end.
Alexei Miller, Gazprom's chief executive, accused Kiev of adopting an "unconstructive" position at the talks and of using blackmail to try to get an "ultra-low" price.
The EU said it would try to get both sides together again for talks later this month, warning that a lack of a deal could have an impact on European supplies heading into the winter months.
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