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Last Updated: Monday, 3 March 2008, 14:28 GMT
Gazprom cuts Ukraine gas supply
Gazprom HQ in Moscow
Gazprom is a key supplier of gas to Europe
Gazprom, Russia's gas monopoly, has cut supplies to Ukraine after talks between the two sides ended in failure.

State-owned Gazprom said it would cut total shipments to Ukraine by 25%, but Ukraine's national gas firm Naftogas has claimed that the reduction is 35%.

The dispute centres on a $1.5bn (770m) debt that Gazprom says it is owed, and Ukraine officials say has been paid.

Gazprom has offered assurances that supply to consumers in the rest of Europe will not be affected.

A previous row between the two sides saw Russia cut gas to Ukraine in 2006, also hitting exports to Western Europe.

The European Commission has called for a swift resolution despite assurances that supply to Europe will not be harmed.

"The Commission has called (on) the two parties to find quickly a definitive solution to this commercial issue," said Commission spokesman Michele Cercone.

"We continue to monitor closely the development of this situation," he added.

Gazprom spokesman Sergei Kupriyanov said: "Gas deliveries to European consumers will go on in full amount."

He added that Gazprom was prepared to continue negotiations with Ukrainian officials.

Stalemate

Last month, Russian President Vladimir Putin and Ukraine's Viktor Yushchenko reached an outline deal, but the details could not be agreed.

Ukraine's deputy prime minister said the money owed had already been transferred and that documents to confirm this had been sent to Gazprom.

But Gazprom's Mr Kupriyanov maintained that the problem had not been resolved.

"Gazprom is a reliable supplier of energy resources, but we cannot and should not deliver gas without payment," he said in a statement.

Continued tensions?

The gas cut came hours after Gazprom chairman Dmitry Medvedev won the Russian presidential election with the support of President Vladimir Putin.

The Kremlin has tightened its grip on Russia's oil and gas supplies and used this control to help create an economic boom in the country.

Valery Nesterov from Troika Dialog stock brokers said he doubted the tense relationship between Moscow and the pro-Western Ukrainian government would change under Mr Medvedev's rule.

"Clearly, the Russia-Ukraine gas relationship, which was already on the rocks, began to deteriorate sharply last month," he said.

He observed the unresolved problems include "Ukrainian debts to Gazprom, gas prices, the marketing scheme for gas, re-exports of Russian gas and more importantly the broader geopolitical disagreements between the two countries".

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