By Denis Dyomkin and Huw Jones
MOSCOW/BRUSSELS (Reuters) - Russia said on Thursday it would restore gas supplies to Europe through Ukraine once international monitors were in place, but Moscow and Kiev remained at odds over the terms of any supervision.
Russian Prime Minister Vladimir Putin said a "collapse" of the authorities in Kiev and high-level corruption in Ukraine were partly to blame for the crisis, which has halted supplies to European states at the height of a bitterly cold snap.
"In order to restore normal flows, (Ukraine) needs to come to Moscow and sign a contract for gas supplies to Ukraine," Putin told western journalists at his official residence outside Moscow.
"And they need to pay for the product they receive. At the market price...our Ukrainian partners don't want to sign and don't want to pay. That's it."
The dispute between Kiev and its former Soviet master in Moscow follows tensions over Ukraine's efforts to join NATO, a move bitterly opposed by Moscow and viewed with wariness even by European members of the alliance and by investors.
Ukraine has been beset for months by political squabbling between President Viktor Yushchenko and his former ally, Prime Minister Yulia Tymoshenko, notably over ties with Russia.
Russia cut off gas for Ukraine's domestic consumption on January 1 in a row over pricing and debts, a dispute Putin said was now damaging Russia's image.
The Czech Republic, the current EU president, said Ukraine had agreed monitors could supervise the transit of Russian gas over its territory but that Russia's gas export monopoly Gazprom had baulked at a deal.
"Unfortunately I have to tell you that Gazprom representatives refused this proposal," Czech Industry and Trade Minister Martin Riman said in Brussels, where EU officials earlier met both sides in a bid to resolve the row.
EU Energy Commissioner Andris Piebalgs said Moscow was insisting on having Russian observers in Ukraine. There was no immediate comment from Russia.
Riman said it was too early to apportion blame for the eight-day gas crisis, which has disrupted supplies to 18 countries.
The head of the Russian gas export monopoly Gazprom, Alexei Miller, had earlier said Ukraine had not yet signed a deal to allow monitors at pumping stations.
EU Commission President Jose Manuel Barroso urged a speedy end to the dispute, which has cut supplies to thousand of homes at the height of a cold snap and has begun to hurt industry.
"This is our priority to make sure that Russia and Ukraine, because of this bilateral dispute, put not in danger the situation of some of our members, including Slovakia."
Its Economy Minister Lubomir Jahnatek said its firms had ignored orders to cut back on gas and were risking a system failure that could leave homes and hospitals without heating.
Piebalgs said the EU would consider any Slovak request to reopen its nuclear plant, should one be made.
CUT OFF
The reduction in supplies has been sharper and more prolonged than a similar disruption in January 2006 and Putin urged the EU to diversify energy routes. It receives a quarter of its gas from Russia -- 80 percent of which comes via Ukraine.
The 27-nation bloc, which hosted talks between the two sides in Brussels on Thursday, accused Russia and Ukraine of "showing insufficient determination to solve the problem, which damages their credibility."
The gas cut-offs have left hundreds of thousands of people in the Balkans without gas, forced factories to shut down and disrupted deliveries as far west as France and Germany.
"We need to resume the gas flows in Europe. We can't be blackmailed," said Czech Deputy Prime Minister Alexandr Vondra.
Gazprom's Miller, speaking after talks with EU officials in Brussels, also said he would hold further face-to-face talks with Ukraine's Naftogaz on a flight back to Moscow to try to restore supplies to Europe.
France and Germany said Russia had to honour its gas contracts with Europe regardless of the dispute but they also warned Ukraine not to forget its own obligations.
Southeast Europe has borne the brunt of the disruption, but it has affected supplies as far west as France and Germany as Europe faced freezing mid-winter temperatures.
"A key point here, is that industrial stoppages are only now beginning to occur (mainly in gas intensive industries), but would spread relatively rapidly if gas supplies remain limited," said Martin Blum, an economist at Unicredit in Vienna.
Based on gas use and reliance on Russia as a source of gas, Blum said Hungary and Slovakia looked most at risk from the halt in supplies. Bulgaria, Serbia and Croatia all had reserves reportedly below 10 days of average consumption, he added.
The euro zone's major economies have escaped significant economic repercussions, but France has reported a drop in supplies and Italy has begun tapping its natural gas stockpiles.
Ukraine's state-run energy company asked domestic chemical producers to halve gas consumption and the country's largest chemical producer said it had stopped production.
(Additional reporting by James Kilner in Moscow, Guy Faulconbridge in Kiev, Marcin Grajewski in Brussels; Martin Santa in Bratislava; Jan Lopatka in Prague; Writing by Jon Boyle; editing by Ralph Boulton)
