MOSCOW, Dec 30: Russia readied on Friday to axe natural gas supplies to Ukraine on New Year’s day as negotiations over Moscow’s demand for a four-fold price increase floundered, raising fears of disruption to deliveries across Europe.

“If Ukraine does not sign a contract on the purchase of gas in the remaining hours before the start of the new year, on January 1 at 10:00 a.m. Moscow time (0700 GMT) gas supplies from the territory of the Russian Federation to Ukraine will be completely cut off,” said Alexei Miller, the chief of Russian gas giant Gazprom.

“The actions will be precise and decisive,” he said on NTV television, assuring that the measure would not affect western Europe.

In Moscow, experts from both countries met for a third day running but hopes were fading for a resolution following the failure of negotiations on Thursday between President Vladimir Putin, Ukrainian Energy Minister Ivan Plachkov and the heads of Gazprom and Ukraine’s Naftogaz.

“Unfortunately, all 12 proposals by Ukraine were not accepted by the Russian side,” Ukrainian Prime Minister Yury Ekhanurov told radio Era FM in Kiev. Ukraine meanwhile rejected a proposal by Putin to provide a loan to help Kiev meet the price rise.

Gazprom, which holds a third of the world’s natural gas reserves, is pressuring Ukraine to pay 220-230 dollars (185-194 euros) per 1,000 cubic metres of gas, up from 50 dollars, from the start of the year. Ukraine says it is ready to pay more but not so quickly.

Although Gazprom says its interests are purely commercial, the dispute has evolved into a bruising political battle just as Russia prepares to take the helm of the Group of Eight nations in 2006.

Ukraine has enough gas to last the bitterly cold winter, but already the crisis is piling pressure on the pro-Western government of President Viktor Yushchenko, who came to power in the “orange revolution” a year ago after defeating a Russian-backed candidate in elections.

Yushchenko, who wants Ukraine to join the European Union and Nato, faces a strong challenge in March parliamentary elections that analysts say could signal the comeback of his pro-Kremlin nemesis Viktor Yanukovich.

Alarm bells are also ringing in the European Union, which gets 20 per cent of its gas and a major portion of its oil supplies from Russia. Fears have been expressed that the bloc risks over-dependence on a country where Putin is accused of retreating from democracy and using the energy card to restore the Kremlin’s clout in Western-leaning ex-Soviet republics.

There are more immediate worries that the row will hit Russian gas customers in western Europe.

To cut off Ukraine, Gazprom will simply reduce the amount of gas running through the main pipeline that serves both Ukraine and Europe, a company spokesman told AFP.

Miller said Gazprom had a “detailed plan of measures” to guarantee EU supplies. However, if Kiev compensates for its lost share by dipping into the gas destined for Europe, that could result in a deficit further down the line.

Meanwhile, Yushchenko ordered his country to brace for a hike in energy prices, decreeing that gas and electricity prices for all consumers would rise to “an economically-founded level”.

He also called on authorities to find ways to cut energy consumption, as well as to boost national gas and oil production, and diversify foreign energy sources and produce nuclear fuel to increase Ukraine’s independence from Russia.—AFP