"It seems to me the document about which we are talking is, at a minimum, ill-considered and unprofessional because to discuss such issues without the basic supplier is simply not serious," he said.
"If the interests of Russia are going to be ignored then we will be compelled to begin to review the principles of our relationship."
The agreement is aimed at avoiding a repeat of January's gas dispute between Moscow and Kiev, which saw large parts of Europe left without the energy supply for two weeks.
"We can not allow our citizens to experience fuel shortages in the depths of winter again," Benita Ferrero-Waldner, EU commissioner for external relations, said.
|Vladimir Putin said Ukraine's plans were 'ill considered and unprofessional' [AFP]
A fifth of gas consumed in the EU comes from Russia through the Ukraine.
Despite Putin's coments, Julian Lee, a senior energy analyst from the Centre for Global Energy Studies in London, told Al Jazeera the upgrade should be in Russia's interests.
"I think it is in Russia's interests to have a viable and stable and secure transit route through Ukraine," he said.
"Russia is clearly progressing with projects for alternative export routes to link Russia to Europe, bypassing Ukraine.
"It seems to me that there is a political element within Gazprom [Russia's state gas company] and within the Russian government that wants to continue to exert control over Ukraine over gas supplies, and sees any sense of an involvement of the European Union in Ukraine as further encroachment on Russia's sphere of influence."
The EU has not said how much money it will commit to the upgrade, but Yulia Tymoshenko, Ukraine's prime minister, has said the project would need $7.5bn. The EU estimated the cost at $3.4bn.
Yushchenko said: "We are determined to improve the functioning of the gas market and root out all kinds of corruption and make sure that the system works to the benefit of all.''
He said a key priority was building gas metering stations to improve the monitoring of gas passing through Ukrainian pipelines.
The deal also intends to improve both the safety and capacity of Ukraine's pipeline
network and revamp its management, to allow Western investors to put up money
without fear of losing any of it to bureaucracy or corruption.