Russia sharply reduces gas supplies to Ukraine

Russia sharply reduced gas supplies to neighbouring Ukraine today after a row over unpaid bills and prices, raising the spectre of supply disruptions to the European Union.

European Union states are anxious to avoid a repeat of a January 2006 row when Moscow cut off supplies to Ukraine causing a brief fall in gas supplies to some European customers.

Moscow and Kiev say they will honour their contracts to supply gas to European customers, who analysts say have enough reserves to manage without Russian supplies for days, but not weeks.

Russian state controlled gas giant, Gazprom, ordered its pumping station on one of the pipeline routes to Ukraine to halt gas supplies on Thursday, Russian state television reported.

In a live broadcast from the pumping station near Russia's border with Ukraine, Vesti-24 television station said Gazprom headquarters in Moscow had ordered the cut-off, and the volume of gas flowing to Ukraine was four times below the normal level.

A spokesman for Gazprom could not immediately be reached for comment.

Pipelines that cross Ukraine carry about one-fifth of the EU's gas needs and are a major source of foreign currency revenue for Gazprom, Russia's biggest company.

A new cut-off could tarnish Russia's reputation as a reliable energy supplier to Europe and further undermine Ukraine's crisis-battered economy.

Russia says the cut-off does not apply to shipments to Europe, but there could be a knock-on effect if it causes a drop in pressure in the transit pipelines or if Kiev halts flows to Europe to use them as a bargaining chip.

Germany's E.ON and BASF and Italy's ENI are among the biggest customers for Russian gas.

Countries in eastern and central Europe are likely to feel any disruption first because they are closer to the potential bottleneck in Ukraine.

Russian Prime Minister Vladimir Putin called European Commission President Jose Manuel Barroso on Wednesday to explain the possible consequences of a cut-off, Barroso's office said.

It said Barroso had also received assurances from Ukrainian Prime Minister Yulia Tymoshenko that there would be no disruption to supplies to the EU.

Ukrainian President Viktor Yushchenko and Tymoshenko urged Russia in a joint statement to continue talks without cutting deliveries. Gazprom said the contract to supply gas to Ukraine had expired.