By Tanya Mosolova and Ron Popeski
MOSCOW/KIEV (Reuters) - Ukraine hinted it would cut flowsof Russian gas to Europe through its pipelines if it ran shortof domestic supplies, after Moscow said on Tuesday it wouldhalve deliveries to Kiev in a row over payments.
A similar dispute between Moscow and Kiev at the start of2006 disrupted supplies to Europe, triggering a politicalcrisis and leading to questions about Russia's reliability asan energy supplier.
Almost a quarter of Europe's gas comes through Ukraine.
Both Ukraine and Russian gas export monopoly Gazprom saiddeliveries to Europe were running normally. But the EuropeanUnion voiced concern and urged both sides to "quickly find adefinitive solution to this commercial issue".
Some analysts said the situation was a major challenge toGazprom's status as a reliable gas supplier to Europe.
"In the long run, this may have an impact on Europeanconsumers' preferences as they try to diversify sources of gasaway from Gazprom," said Pavel Kushnir from Deutsche Bank.
Ukrainian state firm Naftogaz hinted it could take gas fromthe transit pipelines if it could not meet Ukraine's energyneeds.
"Naftogaz declares that it can guarantee uninterruptedtransit for European consumers until such time as Ukraine'senergy security comes under threat," company spokesman ValentynZemlyansky told journalists in Kiev.
"Naftogaz reserves the right to introduce appropriate,asymmetrical actions to defend the interests of Ukrainianconsumers," he said, adding that mild weather and sufficientreserves would allow Ukraine to cope for now.
Not everyone in Ukraine was convinced.
"Reductions will firstly affect production areas withround-the-clock operations, like steel and chemicals," saidAnatoly Kinakh, head of the Ukrainian Union of Industrialists.
"They will hit equipment and quality of output so it cannotgo on for any length of time. There is no basis for anysuggestion that we could live for a month on our reserves."
MEDVEDEV INTERVENES
Gazprom's chairman Dmitry Medvedev, who won Russia'spresidential election on Sunday, called on Ukrainian PresidentViktor Yushchenko to abide by previous gas deals and settle thegas debt issue as quickly as possible.
But neither Yushchenko nor Prime Minister Yulia Tymoshenko,less favourably viewed by the Kremlin, made any freshstatement.
Gazprom blamed Ukraine for the latest cuts, to take effectat 1700 GMT, and added a further 25 percent reduction from aninitial 25 percent cut on Monday. Ukraine will get around 70million cubic metres of gas a day, 50 percent of usual levels.
Russia said Kiev owed $600 million (302 million pounds) inunpaid bills and had not resumed negotiations since itthreatened to reduce supplies.
Though all of Gazprom's exports are reaching Europe,Ukraine said the firm had paid no transit fees for gas going toEurope since December, a statement denied by Gazprom.
Yushchenko, who had accused Tymoshenko's government offailing to keep to payment schedules, last month clinched adeal on arrears and supplies during talks with Kremlin leaderVladimir Putin. But that appears to have unravelled, followinga subsequent visit by the more strident Tymoshenko to Moscow.
Tymoshenko opposes the existence of any intermediaries ingas trade.
"Everything is linked to the fact that Tymoshenko is now inpower and her attempts to eliminate intermediaries from the gastrade. This is what has caused the increased tension," saidVolodymyr Fesenko from Penta, a Kiev-based think tank.
It was not clear if Medvedev, who will be inaugurated inMay, played any role in the decision to reduce supplies.
Diplomats say most key Gazprom decisions are takenpersonally by Putin, who is set to be prime minister underMedvedev.
Ukraine's opposition Regions Party, more pro-Moscow thanthe government, blamed Tymoshenko's administration for themess, saying it lacked "professionalism".
(Additional reporting by Pavel Polityuk in Kiev, writing byAmie Ferris-Rotman and Michael Stott, editing by AnthonyBarker)
