Russia’s state-controlled gas monopoly has rejected an appeal from Ukraine to freeze a planned steep price rise.
Gazprom told Prime Minister Viktor Yushchenko that supplies would be cut off from January 1 unless Kiev accepted a fourfold increase.
Yushchenko said that the proposed price of 230 US dollars was unacceptable – not just because it was high but because it was what he described as economically unjustified, complaining that several countries paid less yet were further away from Russia.
Moscow has said it could no longer subsidise gas for Ukraine and that Kiev must pay a market rate based on average European prices.
Gazprom CEO Alexsei Miller said that if Ukraine did not sign a contract before the New Year then at 10am Russian time on January 1 supplies would be cut off. “The action will be precise and resolute,” he added.
But a quarter of Europe’s gas comes from Russia and nearly all of that is piped across Ukrainian territory.
In 2003, Germany bought nearly 40 per cent of its supplies from Gazprom and Austria almost two thirds.
A clearly-nervous EU has called a meeting for January 4 to discuss worst case scenarios.
Alleviating the problem to a degree, Kiev has signed a deal with Turkmenistan that covers more than half its gas needs for 2006.