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Last Updated: Friday, 30 December 2005, 17:01 GMT
Russian gas cut 'will not hit EU'
Gas pipeline
Ukraine relies on Russia for about one-third of its gas
Russian energy giant Gazprom has renewed a threat to cut off gas supplies to Ukraine - but says it will not hit deliveries to western Europe.

Moscow and Kiev are holding talks over Gazprom's decision to quadruple prices.

Ukraine's President Viktor Yushchenko called for the price to be frozen until 10 January while talks continue, but Gazprom reportedly rejected the offer.

State-owned Gazprom is threatening to cut off Ukraine's gas at 0700 GMT on Sunday if there is no breakthrough.

Central and eastern Europe's gas pipeline network

But Gazprom chief executive Alexei Miller said there was a "detailed plan" to ensure that supplies transiting Ukraine to the EU would not be disrupted.

EU governments are convening a meeting of their gas industry experts in Brussels on 4 January to coordinate their response.

Ukraine at present receives cheap gas from Russia and in return, Russia uses Ukraine's pipeline network to transport most of its gas exports to western Europe.

German pressure

The German government on Friday urged Russia and Ukraine to reach a deal "as soon as possible". Germany gets about 30% of its gas supplies through Ukraine.

Gazprom chairman Alexei Miller
A detailed plan of measures to provide uninterrupted supplies of Russian gas to European consumers was approved
Alexei Miller
Gazprom chief executive

Kiev has rejected Moscow's offer of a loan to help pay for the controversial price hike.

State-owned Gazprom wants to quadruple the gas price to between $220 and $230 per 1,000 cubic metres, insisting that Ukraine must pay market rates.

Mr Miller said Gazprom's actions would "be precise and decisive" if no deal was reached with Ukraine by Sunday. He warned that gas supplies to Ukraine would be "completely cut off".

Ukraine says it cannot afford to pay the extra cost immediately and accuses Moscow of trying to score political points with the price rise.

Relations between Kiev and Moscow have been tense ever since pro-Western Mr Yushchenko was elected president in Ukraine in 2004 after huge street demonstrations.

Mr Yushchenko has now urged Moscow to accept a moratorium on the gas price until 10 January. By that date, he said, talks should be concluded and a contract signed.

But a Gazprom spokesman quoted by Ria Novosti news agency rejected the idea.

"They want to freeze prices for the first 10 days of January, then they'll want another 10 days," the spokesman said.

'Provocative hike'

The BBC's economics correspondent Andrew Walker says the dispute underlines the fact that Russia is set to have an increasingly important role in the world energy market.

Pro-Yushchenko demonstration in Kiev, 23 Dec 05
Yushchenko supporters picketed the Russian embassy in Kiev
It has the largest gas reserves in the world and its crude oil reserves rank in the top 10.

Some European countries already get substantial amounts of gas from Russia - and the possibility of disruption at some stage is real, our correspondent says.

Moscow offered Ukraine a commercial loan, worth $3.6bn (2.1bn), to help cushion the increased cost - a sum President Putin described on local TV as huge, "even by Russian standards".

Ukraine rejected the offer, with Mr Yushchenko's office saying his country "does not need these credits".

Mr Yushchenko was earlier quoted by Russia's Itar-Tass news agency as describing the planned price hike as "provocative".

The row has escalated steadily, with Russia saying that it will cut Ukraine's quota from the pipeline if Ukraine does not agree to the price hike.


BBC NEWS: VIDEO AND AUDIO
How the dispute could affect European gas prices



SEE ALSO:
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Putin admits Ukraine gas 'crisis'
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Ukraine ups ante over Russian gas
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Russia-Ukraine gas row heats up
27 Dec 05 |  Business
Gazprom's global ambitions
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Ukraine rejects Russia gas threat
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Russia threatens Ukraine gas cut
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