Russia rejects Ukraine offer to freeze gas prices

Russian gas giant Gazprom yesterday spurned Ukraine's plea to freeze a rise in prices as the clock ticked down to a New Year deadline for a deal to keep supplies flowing to the ex-Soviet state and Moscow's European customers.

Ukrainian President Viktor Yushchenko's appeal coincided with the apparent failure of last-ditch attempts, watched anxiously by consumers in snowbound Western Europe, to end a row over Russia's sudden demand for a four-fold leap in prices.

A clearly nervous European Union called a January 4 meeting of energy officials from its 25 member states to discuss the issue.

"The idea is to be ready for all eventualities and to have a common approach," European Commission spokesman Amadeu Altafaj Tardio said.

Central European nations started setting up contingency plans just in case there are supply disruptions. But Czech, Hungarian, Polish and Romanian officials said while their countries were prepared, they expected no problems.

Mr Yushchenko's proposal, in a message to Kremlin leader Vladimir Putin, called for further talks with a contract to be signed by January 10.

"Pending completion of these talks and signing of a contract, a moratorium is proposed on increased prices and rates," it read.

The president doggedly remained confident of a solution, but dug in his heels, saying Russian demands were unjustified. But Gazprom clearly had no confidence in his negotiating position.

"There is a danger that after having proposed to freeze the price for the first 10 days of January, the Ukrainian side will then want to freeze it for another 10 days," Gazprom spokesman Sergei Kupriyanov said in response to Ukraine's appeal.

Gazprom says it will cut off all supplies to Ukraine from 0700 GMT tomorrow unless its neighbour agrees to pay $230 for 1,000 cubic metres of gas against a current rate of $50.

Russia argues it is subsidising Ukraine by supplying gas under outdated terms - discounting prices with the costs of using Ukraine's pipelines to send gas to European customers.

A quarter of Europe's gas needs come from Russia and nearly all of that is piped across Ukrainian territory. Simmering in the background is tension between the two countries after Ukraine's "Orange Revolution" protests last year which helped put in power the pro-Western Yushchenko at the expense of the Kremlin's preferred candidate.