Russian gas monopoly Gazprom said yesterday it was preparing to cut gas supplies to Belarus from the New Year as talks with Minsk over pricing terms were not encouraging.

The two sides continued haggling yesterday over terms to end the price dispute that could disrupt supplies to Europe, but Gazprom said the level of the delegation sent by Belarus was too low for any real progress to be made.

"The way the talks are proceeding at this moment prompts us to get ready for a critical development of events," Gazprom's spokesman Sergei Kupriyanov said.

Gazprom has threatened to cut gas supplies to Belarus, one of the transit routes for gas to European consumers, at 8 a.m. tomorrow unless Belarus agrees to pay more for gas, while Minsk has threatened to disrupt transit shipments.

The latest round of gas talks with Belarus ended abruptly late on Friday after Belarussian President Alexander Lukashenko said he would not tolerate Russia's "blackmail" and his nation would rather "go into the bunkers but will not surrender".

The row with Belarus, hitherto a loyal Kremlin ally even as other ex-Soviet republics sought to move out of Moscow's orbit, is part of a wider drive by Gazprom to bring its prices in the former Soviet Union closer to European levels.

The European Commission and Germany have pressed the two sides to reach an agreement quickly to end the dispute out of fear it could have an impact on supplies to European consumers as a similar row with Ukraine did last January.

Belarus, compared with Ukraine however, handles only a relatively small amount of Russian gas to Europe, with supplies going mainly to Germany and Poland.