Ukraine made a $786 million payment to Russia on Friday in a first step towards paying off its gas debt as it seeks to avoid a possible supply cut-off.

The payment covered the country’s gas deliveries for February and March, but is just a small proportion of the $3.5 billion Moscow is demanding from Ukraine to pay back gas debts dating back to November.

After the ousting of president Viktor Yanukovich in February, Russia cancelled discounts that Kiev had previously enjoyed, causing prices to rise by more than 80 percent.

Russia has also said it wants payment up front for deliveries starting in June and has threatened to restrict supplies starting Tuesday if no payment is made.

Ukraine has refused to pay the new prices and talks aimed at resolving the dispute are set to continue Monday, with the EU helping to broker a deal.

Russia has said it is ready to take part in those talks, being held in Brussels, provided that the bank transfer arrives in Russian gas company Gazprom’s account Monday as expected EU Energy Commissioner Guenther Oettinger said Friday.

'Stepping stones'

“We haven’t quite reached an agreement yet, but we had some important stepping stones that make a package solution look possible,” Oettinger said.

“The money was transferred from Kiev to a bank in the United States and then sent from New York to Moscow – a fascinating journey,” Oettinger said, noting the reason for the detour via New York was because energy bills are settled in dollars.

“Provided the money arrives in the Gazprom account in Moscow as planned on Monday morning, both sides said they would continue the talks in Brussels at 2 p.m. on Monday,” he added.

Oettinger said Monday’s talks would focus on a “package deal” linking payments to the market prices that Ukraine has been seeking.

The dispute, the third over gas prices between Ukraine and Russia in a decade, is also a major concern for the EU.

Europe depends on Russia for about a quarter of the natural gas it consumes, and roughly half of Russian imports flow through Ukraine.

Previous disruptions in 2006 and 2009 prompted Brussels to seek ways to diversify supplies.

(FRANCE 24 with AP, AFP and REUTERS)