By Dmitry Zhdannikov and Sabina Zawadzki
MOSCOW/KIEV (Reuters) - Russia said on Thursday it had completely cut gas to its neighbour Ukraine over a contract dispute but assured European states worried about disruptions to their supplies that gas was flowing to them as normal.
European Union states, which receive a fifth of their gas from pipelines crossing Ukraine, want to avoid a repeat of a January 2006 row when Moscow cut off supplies to Ukraine causing a brief fall in gas supplies to Europe.
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, not weeks.
"We have fully cut off supplies to Ukraine as of 10:00 a.m. (7:00 a.m. British time) today," an official at Gazprom's headquarters in Moscow told reporters.
"Usually we supply 390 million cubic metres per day, of which 300 million is transit gas for Europe. Today supplies are running at 300 million cubic metres. We continue supplying Europe in full."
Ukraine's state energy firm Naftogaz said it had already seen a reduction of pressure in its pipelines, and will now automatically pump gas from its reserves. "We see a reduction," a Naftogaz spokesman told Reuters.
Russia's Vesti-24 television station reported from a compressor station in Kursk region, near the border with Ukraine, that the volume of gas passing through the station to Ukraine was now four times below the normal level.
EUROPEAN SUPPLIES
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.
EU ENERGY CONCERNS
The reliability of energy supplies from Russia to Europe is likely to top the agenda of a meeting of EU ministers to be held in the Czech Republic next week.
Ukraine's pro-Western leaders, who have clashed repeatedly with the Kremlin over their ambition to join NATO, say they have enough gas stocks to last for months. But a prolonged row could further undermine Ukraine's crisis-battered economy.
Talks between Russian and Ukrainian officials failed to settle a dispute over the $2 billion (1.4 billion pounds) Moscow said Kiev owed it in arrears for gas deliveries, and over the price at which Ukraine will buy Russian gas next year.
Gazprom had offered gas at $250 per 1,000 cubic metres, a steep rise from 2008's $179.50 but still around half the current European market price, albeit one that is set to fall sharply.
Tymoshenko and President Yushchenko said they were prepared to pay $201 per 1,000 cubic metres.
Kiev is also proposing raising the transit tariffs that Russia pays to transport gas to Europe to no lower than $2 per 1,000 cubic metres of gas for 100 kilometres.
Russia's 2006 dispute with Ukraine prompted calls for the EU to reduce reliance on Russian gas, but Gazprom forecasts that the EU will come to rely on Russia for as much as one-third of its gas by 2015, up from about a quarter now.
(Writing by Guy Faulconbridge and Christian Lowe; Editing by Keith Weir)
