EU warns Ukraine gas dispute could hit ties

PRAGUE/BRUSSELS Jan 7 (Reuters) - The European Union gave Ukraine its clearest warning yet on Wednesday that any failure to meet commitments to deliver Russian gas to the bloc would hurt its aspirations for closer EU ties.

European Commission President Jose Manuel Barroso stressed he was not casting blame in a transit dispute that has caused a shut-down in Russian gas flows via Ukraine, cutting power to industry and homes in south-east Europe.

But speaking after phone calls with Russian and Ukrainian leaders to demand an immediate resumption of supplies, Barroso linked Kiev's long-held hopes of closer EU ties to its credibility as an energy partner.

"If Ukraine wants to be closer to the EU, it should not create any problems for gas to come to the EU," Barroso told a news conference in Prague, where he was meeting Czech officials who hold the rotating presidency of the 27-nation EU.

Barroso said he had received assurances from both sides in the dispute that they would accept international monitors to check the supply of Russian gas through Ukraine destined for Europe. EU officials hope to finalise a deal on deploying such monitors by Thursday.

"It is critically important the supply starts immediately. If not, there will be a real problem of credibility of the supply of Russian gas through Ukraine to the EU," Barroso said.

Ukraine benefited from a flurry of optimism about its goal of joining the European Union after the "Orange Revolution" of 2004 which brought pro-West Viktor Yushchenko to power.

But many EU capitals have grown disillusioned about its ability to meet EU benchmarks on democracy and the economy amid political instability and bitter rows in the Orange camp.

Its bid to join NATO has also suffered.

The EU sees Ukraine as a major potential partner and would not like it to fall back under Russia's sphere of influence.

Before the gas dispute, the EU and Ukraine had been expected to conclude a pact in 2009 on closer ties known as an "association agreement" and involve more economic cooperation, more investment and talks on easing visa rules for Ukrainians.

However, any explicit statement of future entry prospects was blocked at an EU-Ukraine summit last September by the Benelux countries, with Germany and Italy also not keen -- not least to avoid straining ties with Moscow.

The EU has stressed its neutrality throughout the gas row and has rejected overtures from both sides to mediate in what it insists is primarily a commercial dispute between the Russian and Ukrainian companies involved.

That contrasts to the mood during a similar dispute in 2006, when then Russian President Vladimir Putin was widely portrayed in Europe as taking revenge on Kiev for Yushchenko's 2004 victory over a pro-Kremlin candidate.