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Russia to cut off natural gas to Ukraine over price

MOSCOW - Russia's state-controlled natural gas monopoly said early today that Ukraine had refused its last offer on the terms of natural gas deliveries and transit in 2006, setting the stage for Moscow to close the taps on New Year's Day.

The announcement came after a midnight deadline that Gazprom and President Vladimir Putin had given Ukraine to decide on what price it would pay in 2006.

Gazprom spokesman Sergei Kupriyanov said that Gazprom had sent its Ukrainian counterpart a signed contract offering the terms Putin had hours earlier: to maintain Ukraine's current fuel price for three months if Kiev agreed to pay more thereafter.

Putin said his offer was only valid until the end of the day - 10 hours before a threatened cutoff of supplies to Ukraine.

"We received an official answer from the Ukrainian side," Kupriyanov said. The answer said: " "We cannot sign it,' and that is all."

His statement put a cap on a day of conflicting statements from Moscow and Kiev.

The Interfax news agency quoted Ukrainian Fuel and Energy Minister Ivan Plachkov as saying that Ukraine and Russia "will sign an appropriate set of documents during the first four months of 2006."

"That will be followed with final agreements on price formulas and fees for the transit of Russian gas through Ukraine," he was quoted as saying. "There will be gas."

Gazprom is demanding that Ukraine pay $230 - more than four times the current price of $50 - per 1,000 cubic meters of gas, and vowing to halt supplies to Ukraine today.

Ukraine wants an increase that would bring what it pays closer to world prices to be phased in gradually. President Viktor Yushchenko said late Friday that the most it is willing to pay now is $80.

The showdown has underlined the tension boiling between the historically linked, mostly Slavic ex-Soviet republics since the West-leaning Yushchenko - who wants to reduce Moscow's clout in his country - beat his Russian-backed rival in a bitter electoral battle a year ago.

Gazprom has said the price hike marks a long-overdue transfer to free-market price mechanisms. However, Andrei Illarionov, Putin's former economic adviser, denounced it Saturday as a political move signaling a rise of neoimperialist trends in Kremlin policy.

Illarionov said the Kremlin had asked him to help cast the price hike as a free-market measure, but that he resigned because the move "had no relation not only to liberal economic policy, but to economic policy at all."

Russia, which supplies about half of the European Union's gas - most of which flows through Ukraine - has moved in advance to blame Ukraine for any disruption in supplies. Gazprom informed European customers that, once it stops deliveries intended for Ukrainian use, supplies to other countries could be restricted if Kiev siphons off gas meant for transit further west.

[Last modified January 1, 2006, 00:29:14]