The New Nation - Internet Edition

Reuters, Moscow

Russia said on Thursday it had completely cut gas to its neighbor Ukraine over a contract dispute but assured European states worried about disruptions to their supplies that gas was flowing to them as normal.

European Union states, which receive a fifth of their gas from pipelines crossing Ukraine, want to avoid a repeat of a January 2006 row when Moscow cut off supplies to Ukraine causing a brief fall in gas supplies to Europe.

Moscow and Kiev say they will honor their contracts to supply gas to European customers, who analysts say have enough reserves to manage without Russian supplies for days, not weeks.

"We have fully cut off supplies to Ukraine as of 10:00 a.m. (2:00 a.m. EST) today," an official at Gazprom's headquarters in Moscow told reporters.

"Usually we supply 390 million cubic meters per day, of which 300 million is transit gas for Europe. Today supplies are running at 300 million cubic meters. We continue supplying Europe in full."

Ukraine's state energy firm Naftogaz said it had already seen a reduction of pressure in its pipelines, and will now automatically pump gas from its reserves. "We see a reduction," a Naftogaz spokesman told Reuters.

Russia's Vesti-24 television station reported from a compressor station in Kursk region, near the border with Ukraine, that the volume of gas passing through the station to Ukraine was now four times below the normal level.

Pipelines that cross Ukraine carry about one-fifth of the EU's gas needs and are a major source of foreign currency revenue for Gazprom, Russia's biggest company.

A new cut-off could tarnish Russia's reputation as a reliable energy supplier to Europe and further undermine Ukraine's crisis-battered economy.

Russia says the cut-off does not apply to shipments to Europe, but there could be a knock-on effect if it causes a drop in pressure in the transit pipelines or if Kiev halts flows to Europe to use them as a bargaining chip.

Germany's E.ON and BASF and Italy's ENI are among the biggest customers for Russian gas.

Countries in eastern and central Europe are likely to feel any disruption first because they are closer to the potential bottleneck in Ukraine.