Russia Spurns Ukraine's Pleas As Gas Shutoff Looms

KIEV, Ukraine -- Russian gas giant OAO Gazprom yesterday spurned Ukraine's plea to freeze a rise in prices as the clock ticked down to a New Year's Day deadline for a deal to keep supplies flowing to the ex-Soviet state and Moscow's European customers.

Ukrainian President Yushchenko appealed to Russian President Vladimir Putin in a telegram, asking for negotiations to be extended to January 10 with 'a moratorium on price rises' throughout the period.

Ukrainian President Viktor Yushchenko's appeal coincided with the apparent failure of last-ditch attempts, watched anxiously by consumers in snowbound Western Europe, to end a row over Russia's sudden demand for a fourfold leap in prices.

A clearly nervous European Union called a Jan. 4 meeting of energy officials from its 25 member states to discuss the issue.

"The idea is to be ready for all eventualities and to have a common approach," European Commission spokesman Amadeu Altafaj Tardio said.

Central European nations started setting up contingency plans in case there are supply disruptions.

Mr. Yushchenko's proposal, in a message to Kremlin leader Vladimir Putin, called for further talks with a contract to be signed by Jan. 10.

"Pending completion of these talks and signing of a contract, a moratorium is proposed on increased prices and rates," it read.

But Gazprom clearly had no confidence in the proposal.

"There is a danger that after having proposed to freeze the price for the first 10 days of January, the Ukrainian side will then want to freeze it for another 10 days," Gazprom spokesman Sergei Kupriyanov said in response to the appeal.

Gazprom says it will cut off all supplies to Ukraine tomorrow morning unless its neighbour agrees to pay $230 (U.S.) for 1,000 cubic metres of gas against a current rate of $50.

Russia argues it is subsidizing Ukraine by supplying gas under outdated terms -- discounting prices with the costs of using Ukraine's pipelines to send gas to European customers.

A quarter of Europe's gas needs come from Russia and nearly all of that is piped across Ukraine.

Simmering in the background is tension between the two countries after Ukraine's "Orange Revolution" protests last year which helped put in power the pro-Western Mr. Yushchenko at the expense of the Kremlin's preferred candidate.

"I simply do not want to believe that this is a result of pressure from Russia," Mr. Yushchenko said.

He also announced a deal to buy 40 billion cubic metres of gas next year from ex-Soviet Turkmenistan in Central Asia -- at $50.

Source: Reuters

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