Russia cuts off gas to Ukraine

By Christian Lowe and Pavel Polityuk

MOSCOW/KIEV (Reuters) - Russia cut off the gas to its neighbor Ukraine on Thursday after a contract dispute but increased supplies to other European states to try to reassure customers worried about possible disruption.

The European Union, which receives a fifth of its gas from pipelines crossing Ukraine, and the United States urged further negotiations to resolve the dispute and said all supply commitments must be met.

Energy firms in Germany, France, Poland, Romania, Austria and Italy said they had not yet seen any drop in supply. Europe has enough gas stockpiled to manage without Russian gas for several days, though not weeks, analysts said.

The row could raise new doubts about Moscow's reliability as an energy supplier and fuel suspicions in the West -- already running high since Russia's war with Georgia last August -- that the Kremlin bullies its pro-Western neighbors.

Ukrainian President Viktor Yushchenko, the target of fierce criticism from Moscow over his drive to take Ukraine into the NATO alliance, said he wanted to resume talks with Moscow to settle a row over payment arrears and gas prices for 2009.

Yushchenko said in a statement he believed a compromise deal with Russian gas export monopoly Gazprom was achievable by Orthodox Christmas on January 7.

Signaling a possible way out of the stand-off, Ukraine's state energy firm Naftogaz increased the amount it said it was prepared to pay for Russian gas to $235 per 1,000 cubic meters -- $15 short of the amount Russia had earlier demanded -- but also said it wanted Russia to pay higher transit fees.

Russian gas export monopoly Gazprom, signaled a tougher stance, saying it now wanted Ukraine to pay $418 per 1,000 cubic meters, more than double the $179.5 paid last year.