Moscow and Kiev get talking

Last-minute talks between Russian and Ukrainian state energy players will take place today to resolve a fresh row over payment arrears that threatens to reduce shipments of Russian gas to Ukraine.

Russian gas giant Gazprom has pledged to cut some gas to Ukraine from 0700 GMT tomorrow if Ukraine does not settle a $1.5 billion debt for earlier supplies. Ukraine blames Russian-imposed gas traders for the debt.

Russia supplies a quarter of Europe's gas mainly via the territory of Ukraine, and markets are closely watching disputes between the two states after a pricing row disrupted shipments briefly in winter 2006.

Oleh Dubyna the heady of Ukrainian state-run company Naftohaz Ukrainy was to meet Gazprom executives later today, a Russian energy official told Reuters, without making any further comment.

Ukraine's last resort to avoid a supply cut could be Yushchenko's visit to Moscow tomorrow. Last Friday, Yushchenko gave Prime Minister Yulia Tymoshenko three days to resolve the row.

Tymoshenko has long urged Moscow to abandon intermediaries and sign a direct deal between Gazprom and Naftohaz.

Today, she told reporters in Kiev it was her predecessor, Viktor Yanukovich, and former Energy Minister Yuri Boiko who were responsible for running up the arrears and said she wanted the debt restructured.

She put at $1.072 billion debts to RosUkrEnergo, the Swiss intermediary that supplies Russian gas.

"As the Yanukovich government and Boiko left this debt, I believe Boiko, who now represents RosUkrEnergo, must do all he can so this debt can be restructured over a long period of time," she said. "Ukraine will not pay this debt at one go."

Tymoshenko, returned to office in December, also said Russian officials had offered assurances, a day before Yushchenko holds Kremlin talks, that there would be no cut off of supplies.

Both Ukraine and Russia have already assured Europe that gas flows westward will not be interrupted.

Gazprom also says it would cut supplies of Russian gas only, leaving supplies of Central Asian gas intact.

Tymoshenko said officials from Naftohaz had been mandated to secure an agreement that Ukraine uses only gas from Central Asia, cheaper than gas produced in Russia.

Russian gas accounts for only a small portion of Gazprom's supplies to Ukraine. Gazprom has said its share rose in January, although it gives no breakdown by volume.

Tymoshenko said further talks on eliminating all intermediaries in gas trade like RosUkrEnergo would take place during her planned visit to Moscow later this month.