Ukraine hints at Europe gas cut in row with Russia

Ukraine hinted it would cut flows of Russian gas to Europe through its pipelines if it ran short of supplies, after Moscow said yesterday it would halve deliveries to Kiev in a row over payments.

A similar dispute between Moscow and Kiev at the start of 2006 ended up in interruptions of gas to Europe, triggering a political crisis and leading to questions about Russia's reliability as an energy supplier.

Almost a quarter of Europe's gas comes through Ukraine.

Both Ukraine and Russian gas export monopoly Gazprom said deliveries to Europe were running normally for now. But the EU voiced concern and urged both sides to "quickly find a definitive solution to this commercial issue".

Ukraine's state gas company Naftogaz said in a statement it reserved the right to take "appropriate action" if Ukraine's energy security came under threat.

"Naftogaz declares that it can guarantee uninterrupted transit for European consumers until such time as Ukraine's energy security comes under threat," the company said in a statement.

"In the event that Gazprom continues blatantly to violate technical agreements between the two countries by reducing volumes of Central Asian gas to Ukraine, Naftogaz reserves the right to introduce appropriate, assymetrical actions to defend the interests of Ukrainian consumers," it said.

Gazprom insisted that European consumers would not be affected.

"Export supplies of gas will be provided in full," Gazprom spokesman Sergei Kupriyanov said. "Gazprom is ready to continue negotiations and appeals to the Ukrainian authorities to settle all the outstanding matters in the most urgent manner".

Gazprom chairman Dmitry Medvedev was elected as Russia's next President on Sunday but it was not clear whether he played any role in the decision. Diplomats say most key Gazprom decisions are taken personally by President Vladimir Putin.

Gazprom blamed Ukraine for the latest cuts and amount to a further 25 per cent reduction from an initial 25 per cent cut on Monday. Ukraine will get around 70 million cubic metres of gas a day, 50 per cent of the usual amount.

Russia said Kiev owed $600 million in unpaid bills and had not resumed negotiations since it threatened to reduce supplies.

Though all of Gazprom's exports are reaching Europe, Ukraine said the firm had not paid transit fees for gas going to Europe since December, a statement denied by Gazprom.

Ukrainian President Viktor Yushchenko had last month reached an agreement on the gas dispute during talks with Mr Putin but this appears to have unravelled, following a visit by stridently pro-Western Ukrainian prime minister Yulia Tymoshenko to Moscow.

Ukraine's opposition Party of the Regions, which is more pro-Moscow than the government, blamed Prime Minister Tymoshenko's administration for the mess.

"The significant cuts in supplies of gas from Russia, resulting from the current government's lack of professionalism, will shut down industry and leave Ukrainians to freeze in their homes," it said in a statement.