Russia warns of 'fatal' consequences for Ukraine as gas price row escalates

A dispute between Russia and Ukraine about gas prices has escalated, with Kiev threatening to tap Russian gas shipments heading for Europe - and Moscow warning that attempts to raise the rent it pays to base its Black Sea fleet in a Ukrainian port would have "fatal" consequences.

The two are locked in a dispute over plans by the state-controlled Russian gas giant Gazprom to more than quadruple the price it charges Ukraine for natural gas, from about $50 (£29) per 1,000 cubic metres to $230, in line with world prices. Gazprom provides one-third of Ukraine's gas and has warned it will turn off the taps on Sunday if Kiev refuses.

Ukraine has sought to have the increase phased in over several years and upped the stakes this month by saying it was considering raising the $98m in annual rent Moscow pays for the use of its naval base in Sevastopol, on Ukraine's southern Crimean peninsula.

The Russian Defence Minister Sergei Ivanov warned yesterday any attempt to change the terms of Moscow's lease would threaten agreements recognising Ukraine's post-Soviet borders. "The accord on conditions for the presence of the Russian Black Sea fleet is part of the main Russian-Ukrainian treaty, the second part of which includes the point on recognition of the inviolability of state borders ," he told state television. "To revise those agreements would be fatal."

The Ukrainian Prime Minister, Yuriy Yekhanurov, said Ukraine had the "unquestionable legal right" to take 15 per cent of Russian gas shipments to Europe that pass through its territory as a transit fee. About 80 per cent of Gazprom's European exports pass through Ukraine and the company supplies about half the European Union's gas.

Sergei Kuprianov, at Gazprom, said any attempt by Ukraine to siphon off gas destined for Europe would be regarded as theft. "All responsibility for shortage of Russian gas supplies to European customers will lie completely with Ukraine."

Mr Kuprianov denied claims by Ukraine's Energy Minister Ivan Plachkov that a deal had been reached to phase in the price rise. Mr Kuprianov called Mr Plachkov's statement "a provocation." Russia's Energy Minister Viktor Khristenko also denied an agreement was in place.

Russian officials insist the gas price rise is financially justified because it will end Moscow's long-standing energy subsidies to its former Soviet satellite. But many Ukrainians see the move as punishment for the country's pro-Western course under President Viktor Yushchenko, elected after last year's Orange Revolution. Gazprom has also announced gas price rises for Georgia and Moldova, both ex-Soviet republics seeking stronger ties with the West, but has extended a deal with Belarus, which is strongly allied with Russia, that will price natural gas at $46.68 per 1,000 cubic metres.

Mr Yushchenko's deputy chief of staff, Anatoly Matviyenko, raised the issue of the Black Sea fleet this month, saying if Gazprom wanted to charge world prices for gas, Ukraine "has the right to raise the question about suitable world prices... for the existence of foreign troops."