RPT-SCENARIOS-Will Russia go for another damaging gas war?

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By Dmitry Zhdannikov

MOSCOW, Nov 11 (Reuters) - Russia cannot afford cutting gas to Ukraine for a second year in a row as it would have too much to lose, including Europe's support for its key gas projects at a time when its European gas market share is shrinking.

But, despite a virtual consensus among analysts that a cut in supplies to Ukraine and the subsequent stoppage of flows to Europe would equal political and economic suicide for Moscow, sceptics say Kremlin policies could be still driven by apparently irrational decision making.

Following are some scenarios of how Russia-Ukraine relations could unfold and what could happen to Russian gas flows to Europe, which cover a quarter of the continent's needs:

TIMELY PAYMENTS, NO CUTS

Ukraine keeps paying its monthly Russian gas bills on time before and after the presidential elections on Jan. 17, possibly with help from the European Union and international financial organisations, while Moscow maintains gas flows.

Russia and Ukraine clinched a deal in January under which Kiev must pay its monthly gas bills before the seventh of the following month and guarantee transit to Europe, which was left short of gas for three weeks in January in the dead of winter.

Russian Prime Minister Vladimir Putin has warned Europe that Ukraine may fail to pay its monthly bills because of its dire economic situation, but Kiev has so far met all deadlines, including a $460 million bill for October.

Moscow also accused pro-Western President Viktor Yushchenko, who came to power in 2004 after beating a Moscow-backed candidate, of obstructing timely payments by Prime Minister Yulia Tymoshenko, now Moscow's favourite politician in Ukraine.

Both run for president in January alongside Viktor Yanukovich, Moscow's former favourite in Ukraine, and the Kremlin has said relations cannot improve under Yushchenko.

"Any gas cuts will play into Yushchenko's hands so I don't believe Russia could cut gas this year," said Valery Nesterov, oil and gas analyst at Troika Dialog.

PROBLEMS WITH PAYMENTS, NO CUTS

Problems with payments could still arise on Dec. 7 or Jan. 7 should Ukraine fail to generate cash amid deep recession, state energy firm Naftogaz's crumbling finances and doubts over an IMF bailout programme. [ID:nLU651399]