Russia’s state gas giant Gazprom said it had switched Ukraine to a pre-payment system on Monday After failing to pay its gas bill.

Russia's state gas giant Gazprom said Monday it had switched Ukraine to a pre-payment system on Monday after failing to pay its gas bill, a move that effectively halts all shipments because Kiev has not forwarded any money for future gas deliveries to Moscow.

Ukrainian Naftogaz has now to pay in advance for any natural gas from Russia, after both companies have filed lawsuits against each other at the Stockholm Arbitration Court

“This decision was taken due to systematic failure of Naftogaz Ukraine to pay. The debt of the company for Russian gas stands at $4.458 billion, including $1.451 billion for November and December 2013, and $3.007 billion for April-May 2014,” Gazprom said in a statement posted on their website.

Europe risked gas supply disruptions after Russia rejected an 11th-hour compromise deal and cut supplies to Ukraine in a feud that has further fractured East-West relations.

"We have been informed that gas deliveries to Ukraine have been reduced to zero, with only the volumes sent for transit to European states," Ukrainian Energy Minister Yuriy Prodan told a government meeting.

Gazprom said it had further notified Europe of possible gas disruption and lodged a $4.5 billion (3.3 billion euro) lawsuit against Ukraine with an arbitration court in Stockholm.

Ukraine is now trying to secure greater gas deliveries from its western European neighbors to make up for the lost Russian supplies.

Kiev also lodged a $6.0-billion (4.4-billion-euro) suit against Gazprom with the same Stockholm court to recover its past "overpayment" for gas.