Putin says gas prices for Ukraine to rise softly

MOSCOW (Reuters) - President Vladimir Putin said on Thursday that Russia wanted a gradual transition to market gas prices for Ukraine, regardless of the political situation in its former Soviet neighbor.

Suggestions Russia will impose steep price increases on Ukraine and Belarus cause worries in Western Europe, which gets a quarter of its gas from Russia via pipelines across the two countries, that a price row could lead to supply interruptions.

"The development of relations between Russia and Ukraine should obviously be built on a modern, pragmatic basis ... On energy, cooperation in this sphere should of course be based on market principles," Putin said.

"Moving to market relations, we intend to do it softly, calmly, in a friendly way, not damaging our Ukrainian partners," he told an annual televised question and answer session.

The two sides have yet to agree on gas prices for 2008, when they are expected to rise from the current $130 per 1,000 cubic meters.

A pro-Western coalition led by Ukraine's former prime minister Yulia Timoshenko won the country's parliamentary election last month and is likely to form a new government.

Moscow's relations with Kiev plunged to their low during Tymoshenko's brief term as prime minister in 2005 and analysts have said the Kremlin might use gas issues in its potential disputes with Ukraine's new government.

Putin said Russia wanted to cooperate with the new government no matter who heads it.

"As for political cooperation, I hope that whatever government is chosen in Ukraine, whatever political platform it bases its policies on, reality will push partners to develop their relationships. We want it," he said.

A few days after the elections, Russian gas export monopoly Gazprom accused Ukraine of not paying its gas debts and threatened to cut supplies.

The deal was settled in a week, but revived memories of a similar pricing dispute between Gazprom and Ukraine which led to brief cuts in gas supplies to Europe in January 2006.