Despite efforts by Gazprom to help Naftogaz obtain financing, "there has been no movement in this direction. This explains the toughness with which our intentions have been presented," Kupriyanov said.

An earlier dispute between Russia and Ukraine over gas prices led to a brief interruption of gas supplies in several European countries in January 2006. Most of the European Union's gas imports from Russia go through Ukraine.

Debt demands

Kupriyanov said the "full and unconditional liquidation of outstanding debts by Ukraine" was required under an agreement signed last month by Vladimir Putin, the Russian prime minister, and his Ukrainian counterpart Yulia Tymoshenko.

"However, this has not happened so far," he added. Kupriyanov reiterated comments by Alexei Miller, Gazprom's chief executive, that the price Ukraine pays for gas could increase to $400 per 1,000 cubic metres from the current level of $179.5.

"This price was not stated just for its own sake. If we move to market relations not in 2011, but now, then precisely this price will be faced by Ukraine on January 1 (2009)."

Under the agreement reached in October between Putin and Tymoshenko, the countries are to move to market prices for gas by 2011. Currently, Ukraine pays much less for Russian gas than EU countries.

Neither Gazprom nor Naftogaz could be reached for immediate comment Saturday.

Yushchenko ordered his government to repay outstanding debts to Russia [AFP]
Moscow's latest gas dispute with Kiev comes amid the global financial crisis, which has affected both countries but hit especially hard in Ukraine.

Earlier this month Ukraine became the first country to receive emergency assistance from the International Monetary Fund to help overcome the crisis, with a loan package worth $16.4bn ($12.8bn euros).

Following Medvedev's demand on Thursday, Naftogaz responded by saying it had no debt to Gazprom and that it owed around $1.26bn, but only to gas trader RosUkrEnergo, an intermediary for Russia-Ukraine gas exchanges.

On Friday, Viktor Yushchenko, the Ukrainian president, ordered his government to settle its debt to Russia, accusing Tymoshenko of making no effort to pay up.

The government's mistakes could lead to "the colonisation of Ukraine," the president warned in a statement.