UPDATE 3-Ukraine president tells govt to settle gas disputes

(Adds EU ambassador to Russia in para 7-8)

By Yuri Kulikov

KIEV, Nov 21 (Reuters) - Ukraine's President Viktor Yushchenko told the government on Friday to settle arrears for gas supplies from Russia and agree on a price for 2009 imports, a day after Moscow said its neighbour had $2.4 billion in debts.

Yushchenko put the blame for the new announcement of unsettled arrears squarely on the government led by his former ally turned rival, Prime Minister Yulia Tymoshenko.

"It is your personal responsibility that a state monopoly over which the government exercises direct control has arrears of more than $2 billion," he told a meeting of the National Security and Defence Council.

"A few days ago you said that everything was settled with gas. You must therefore prove in five days that you have resolved everything, starting with bills for gas supplied."

Tymoshenko, on a visit to Sweden, told Ukrainian media a deal would soon be signed with Russia settling any debts and setting down a gradual rise in prices, under a deal she struck with Russian Prime Minister Vladimir Putin in October.

Ukraine's state energy company Naftogaz says the arrears amount to only $1.27 billion to RosUkrEnergo -- the intermediary that supplies Russian gas to Ukraine. It vowed to do "everything possible to settle the arrears as quickly as possible".

The European Union is concerned about disagreements over gas between Moscow and Kiev as these can disrupt Russian supplies to Europe that flow through pipelines across Ukrainian territory.

The EU said it was "confident" Russia and Ukraine would resolve this dispute to avoid a repetition of gas cuts that shocked Europe in the winter of 2005-2006 and prompted European politicians to urge the bloc to cut dependence on Russian gas.

"We have expressed... our confidence that they will find a solution and that the gas supply to the European Union will not be disrupted," EU's envoy to Russia Marc Franco told Reuters.

Ukraine and Russia are engaged in talks on a 2009 price for gas, currently set at $179.50 per 1,000 cubic metres.

Gazprom has suggested an increase to $400 from next year, though Ukraine's industrial policy minister, Volodymyr Novytsky, on Friday dismissed the amount as a "political price".

Tymoshenko, quoted by Interfax news agency in Stockholm, said: "We need to be patient and wait for the signing of an agreement, where I believe the price will be that set down in the memorandum I signed with Vladimir Putin, where it is stressed that we will move gradually towards market prices."

Such a deal, she said, would also cover arrears.

"POLITICAL PRICE"

The latest of several recurring rows over gas underscored uneasy relations between the neighbours since the 2004 "Orange Revolution" brought pro-Western leaders to power in Kiev.

Moscow and Kiev are also at odds over Ukraine's bid to join NATO, its call for Russia's Black Sea Fleet to leave the Crimea peninsula by 2017 and interpretations of Soviet-era history.

Analysts said a possible sharp rise in gas prices would hurt both Gazprom and Ukraine, which has secured a $16.2 billion loan from the International Monetary Fund amid the financial crisis.

"...A substantial rise in gas prices could push the economy over the edge, hence a confrontation between Gazprom and Ukraine is possible," Russia's Uralsib bank said in a note.

"A conflict would damage both sides but Gazprom would suffer more as the situation would again bring Russia's status as a reliable energy supplier into question once more..."

In his remarks to the council, Yushchenko said money had to be found to pay off the arrears.

"This is your personal matter, regardless of subsidised prices and pointless rate policies. Don't drag people, or us, into this," he said.

"My second piece of advice is to press on with the talks," he said. "Effective negotiations, not with just one round, but based on clear, understandable principles will produce an answer as to whether we will have a political price in 2009."

Tymoshenko's government has tried to maintain its popularity by keeping down price increases for communal services and subsidising gas prices paid by households. (Writing by Ron Popeski, Editing by Anthony Barker)