Russia signs gas deal with EU

MOSCOW/KIEV (Reuters) - Russia and the European Union signed an accord on Saturday aimed at restoring Russian gas supplies via Ukraine, whose cut-off has plunged large parts of Europe into a midwinter energy crisis.

Czech Prime Minister Mirek Topolanek, representing the EU presidency, then flew to Kiev hoping to persuade Ukraine to sign the deal, which would allow EU, Ukrainian and Russian observers to monitor the gas flows across Ukrainian territory.

The agreement would assuage Russian fears that Ukraine is siphoning off fuel for its own use. Kiev denies the charge.

"As soon as the mechanism of control starts working, we will send the gas to the system. If we see that it is stolen again, we will again cut flows," Russian Prime Minister Vladimir Putin said after five hours of talks with Topolanek in Moscow.

The dispute, which began when Russia and Ukraine could not agree on this year's gas prices, has led to the worst ever disruption of Russian gas supplies to Europe.

The continent relies on Russia for a quarter of its supplies. Eighty percent of Russian gas to Europe is piped through Ukraine.

Eastern and central Europe have borne the brunt of the dispute, which has shut down factories and left tens of thousands of households shivering in sub-zero temperatures without gas heating. Supplies to 18 countries have been disrupted.

Despite clearing the deal on Saturday, Putin showed no sign of easing his tough rhetoric on Ukraine.

"Our actions do not aim to worsen but rather to improve the situation in Ukraine, to help Ukraine get rid of crooks and bribe-takers and make its economy more transparent," he said.

He said that in addition to monitors from Russia, Ukraine and the EU, specialists from European gas firms would join the team checking flows across Ukraine, something Kiev has opposed. Putin said Topolanek had also asked to include specialists from Norway.

NO PRICE DEAL

Relations between Moscow and Kiev, already tense because of Russian opposition to Ukraine's push to join NATO, have suffered a further sharp downward lurch.

Russia has accused Ukraine of corruption and stealing gas meant for Europe, and Kiev said Russia's actions amounted to blackmail to extract an unjustifiably high price for the gas it sells to Ukraine.

Sources close to the talks, speaking on condition of anonymity, told Reuters the agreement signed in Moscow had been tweaked slightly at Russia's request, but had not changed substantially from an earlier draft.

Even if the gas supply is resumed to Europe, it is unlikely to be delivered to Ukrainian consumers, as Moscow and Kiev have yet to agree a supply contract for this year.

Russia, which cut off supplies to Ukraine on New Year's Day because of the dispute over pricing and debts, has repeatedly said Ukraine must pay the going market rate for gas.

Oleh Dubyna, chief executive of Ukrainian state energy company Naftogaz, returned from Moscow on Saturday having failed to agree a 2009 gas supply deal in the latest round of talks with Russian gas export monopoly Gazprom.

"Unfortunately the talks with Gazprom have finished with nothing," Dubyna told reporters at Kiev airport on his return. "The talks now have to proceed at a higher level."

Dubyna said Gazprom had again demanded a price of $450 per 1,000 cubic meters of gas, which he said Ukraine could not accept. Naftogaz has previously insisted on a price of $201, up from $179.50 in 2008.