2 December 2005 - Russian gas giant Gazprom has warned the European Commission that Ukraine's refusal to sign a new gas transportation contract for 2006 may endanger natural gas deliveries to Europe.

Gazprom has proposed that its transport of gas through Ukraine should be paid for in cash rather than by letting Ukraine keep a proportion of the gas supplied by Gazprom to Europe as payment for the passage. "We have drawn the European Commission's attention to this entirely unacceptable practice", said Gazprom Vice President Alexander Medvedev. Kiev has said that in absence of an agreement it will continue with the practice of barter payments.

According to Moscow, Ukraine must pay for Russian gas at world prices and terminate all barter deals. According to Gazprom, Kiev could face higher prices for Russian gas if it refused to accept a "compromise price" of $160 per 1000 cubic metres. The current price paid by Ukraine is $50, and Kiev wants to keep the current prices unchanged in 2006.

Gazprom has said that the price of Russian gas delivered to several other, pro-Western ex-Soviet states will also go up sharply. However, Gazprom chairman Alexander Ryazanov commented that "this is not politics, this is economics".

Meanwhile, Gazprom has announced that it will increase natural gas exports to Europe by 4.1 per cent in 2006, up from 145 billion cubic metres in 2005 to 151 billion cubic metres next year. Gazprom supplies some 25 per cent of Europe's natural gas, mostly via pipelines across Ukraine and Belarus.