KIEV, Ukraine (Reuters):RUSSIA'S STATE-CONTROLLED Gazprom yesterday spurned a Ukrainian proposal to freeze a steep rise for gas as experts discuss the bitter dispute that could threaten fuel supplies to a winter-bound Europe.
But the Russian gas monopoly said it was up to the Kremlin to formally respond to an appeal by Ukrainian President Viktor Yushchenko. Interfax news agency quoted the Kremlin press office as saying closer to the end of the day that Yushchenko's message has not arrived yet.
"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," said Gazprom's spokesman Sergei Kupriyanov.
Gazprom wants Ukraine to accept a four-fold price hike for its gas and has threatened to cut off supplies to its neighbour from January 1 if Kiev refuses.
Russia argues it is subsidising Ukraine by supplying gas under a long-term contract at well below current world market prices and wants to charge $230 per 1,000 cubic metres from next year.
DIFFERENT RATES
Gazprom says all European customers pay well over $200 per 1,000 cubic metres, but Ukraine argues that Russia charges different rates for different countries.
"The president of Ukraine is proposing ... that talks be concluded and a contract signed in the first 10 days of January," said a statement on President Viktor Yushchenko's Web site www.president.gov.ua.
"Pending completion of these talks and signing of a contract, a moratorium is proposed on increased prices and rates," said the statement, quoting a telegram sent by Yushchenko to Russian President Vladimir Putin.
A clearly nervous European Union called a January 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.
A quarter of Europe's gas needs come from Russia and nearly all of that is piped across Ukrainian territory.
Ukraine accused Russia of profiteering after Gazprom announced it had snapped up a large chunk of gas exports next year from another former Soviet state, Turkmenistan, normally a major supplier to Ukraine.
WANT TO MAKE MONEY
"I think these people simply want to make money," Ukrainian Prime Minister Yuri Yekhanurov told Radio Era.
Ukraine's Energy Minister Ivan Plachkov flew back to Kiev overnight after two days of what appear to have been fruitless bargaining in Moscow.
A statement issued by his ministry made clear there had been no progress at talks. "At this time the two sides have been unable to reach an understanding on these issues," it said.
In the meantime, Gazprom sounded uncompromising.
"If in the remaining hours, Ukraine does not sign a contract for gas, then at 10 a.m. Moscow time (0700 GMT) on Jan. 1 the Russian Federation will completely sever supplies to the Ukrainian customer," Gazprom chief Alexei Miller told reporters.
Ukraine, its economy struggling, counters that it simply cannot afford such an abrupt hike and wants a price of $70-80.
Simmering in the background is deep tension between the two countries after Ukraine's popular revolution a year ago which put in power the West-leaning government of President Viktor Yushchenko at the expense of the Kremlin's preferred candidate.
PUNISHING UKRAINE
Officials in Kiev say Gazprom is acting at the Kremlin's behest to punish Ukraine for pro-Western policies.
Ukraine's main bargaining chip is that Russia has to use its territory to pipe most of its gas to European markets. Ukraine has in the past admitted to helping itself to the gas. But Miller ruled out any threat to supplies reaching Europe.
"A plan has been made for securing uninterrupted supplies of Russian gas to European customers," he said without elaborating.
Central European nations started setting up contingency plans just in case there are supply disruptions.
But Czech, Hungarian, Polish and Romanian officials said while their countries were prepared, they expected no problems.
On Thursday, Gazprom said it had won a deal to buy 30 billion cubic metres of gas from Turkmenistan next year at a price of $65 per 1,000 cubic metres, up from the previous $44.
That is close to the amount the Central Asian state usually supplies to Ukraine and far above Gazprom's normal purchases of Turkmen gas.
Yekhanurov said Ukraine had clinched its own deal on Turkmen supplies in 2006 "at a low price and with volumes that suit us" and that Yushchenko would announce the details later in the day. Turkmenistan had previously offered Ukraine gas at $60.
(Additional reporting by Dmitry Zhdannikov in Moscow)
