Ukraine's PM says Russia will not cut gas supply

By Natalya Zinets

KIEV (Reuters) - There will be no cutoff of Russian gas to Ukrainian consumers despite threats to reduce volumes over payment arrears and contractual issues, Ukrainian Prime Minister Yulia Tymoshenko said on Saturday.

Tymoshenko made her remarks two days before a reduction in supplies Russian giant Gazprom says it will implement unless outstanding issues are settled. That deadline falls the morning after Russia's presidential election.

Gazprom has often threatened to cut gas supplies during disputes over price with Ukraine and Belarus, but has never made good on the threats except in the New Year of 2006. That brief disruption cut supplies to Gazprom's west European customers.

"I am certain that there will be no cutoff of gas. Ukrainians will be able to use gas without fuss. No one is going to cut off anything," Tymoshenko told a news conference.

Tymoshenko, long an opponent of intermediaries in gas trade, said that one such go-between, Ukrgazenergo, would no longer distribute imported gas to Ukrainian consumers from March 1. That would now be done by state oil and gas company Naftogaz.

"We have decided firmly that not a single cubic meter of gas will be supplied through anyone other than Naftogaz," she said.

"I believe Russia will be conciliatory towards Ukraine and form relations with no go-betweens...I always believed there should be no intermediaries, no short-lived corporations. We have Gazprom and Naftogaz. Let's sign an agreement and buy gas. "

Gazprom's chairman, First Deputy Prime Minister Dmitry Medvedev, is heavily favored to win Russia's presidential election on Sunday.

Gazprom has threatened to cut supplies by 25 percent on Monday. Despite payment of some arrears by Ukraine last week it said conditions had not been met, including the conclusion of a 2008 supply agreement, and its threat remained in force.

Both sides have said the dispute will have no effect on supplies transiting through Ukraine to western Europe.

Ukrainian officials, including President Viktor Yushchenko, last week said Ukraine's state energy firm Naftogaz had settled its gas debt for 2007, which Gazprom has put at $1.5 billion.

Yushchenko and outgoing Kremlin leader Vladimir Putin agreed last month in Moscow on settling arrears and, over time, on doing away with intermediaries. A second go-between, RosUkrEnergo, delivers gas from Russia to Ukraine.

But during a later trip to Moscow by Tymoshenko, viewed less favorably by the Kremlin, it was clear no deal had emerged.

Tymoshenko, the president's ally during the 2004 "Orange Revolution" rallies that swept him to power, was fired after seven months as premier. The two reconciled and she returned to office late last year, though they have disagreed on issues ranging from gas to privatization.

(Editing by Peter Blackburn)