KIEV: Talks to break a deadlock on Russian gas supplies to Ukraine went down to the wire on Friday, with negotiators racing to beat a New Year deadline for Kiev to pay steep price increases or have supplies cut.

Ukrainian Energy Minister Ivan Plachkov flew back to Ukraine overnight after talks went on late into the evening in Moscow, where Russian President Vladimir Putin suggested offering Kiev credits to help pay for a more than four-fold price rise.

Ukrainian Prime Minister Yuri Yekhanurov said Moscow was driving home its position by offering Ukraine its own gas to replace much cheaper supplies from Turkmenistan in Central Asia.

"I think these people simply want to make money," Yekhanurov told Radio Era.

On Thursday, Russia's state-controlled gas giant Gazprom announced it would buy 30 billion cubic metres of gas next year from fellow former Soviet state Turkmenistan at US$65 per 1,000 cubic metres.

That is close to the amount Turkmenistan usually supplies to Ukraine and far beyond Gazprom's usual purchases of Turkmen gas.

Plachkov was briefing President Viktor Yushchenko ahead of a new round of talks watched anxiously by European customers - 80 per cent of Russia's supplies to Europe pass through Ukraine.

Ukraine's president dismissed Putin's offer and said his country intended to pay no more than US$70-80 per 1,000 cubic metres - against Gazprom's demand for US$230.

And Yekhanurov said Ukraine and Turkmenistan had clinched a deal on supplies in 2006 "at a low price and with volumes that suit us".

He said the Ukrainian president would announce details of that deal with Turkmenistan later in the day. Turkmenistan had previously offered Ukraine gas at US$60.

Relations between Russia and Ukraine have become strained since Yushchenko took power after defeating a Moscow-backed rival in a peaceful revolution a year ago.

Officials in Kiev say Gazprom is acting at the Kremlin's behest to punish Ukraine for pro-Western policies, especially as it has sought lower increases from other ex-Soviet states.

Yekhanurov urged Ukrainians not to panic over Gazprom's threat to cut supplies on New Year's Day if no deal is clinched.

Nothing would change, he said.

"We are ready for any cataclysm. The main thing is that consumers will feel nothing," he told Radio Era.

"They will get all the gas they need. We have enough to meet their needs. And we will all be at work at our desks."

He restated Ukraine's position that, in the absence of a new deal, an accord on supplies through 2009 would remain in force.

Gazprom says the increase in gas prices for Ukraine from the current rate of US$50 reflects European market prices. Ukraine says there are no grounds for the new level and is threatening to take the dispute to international arbitration.

Yushchenko says Ukraine is prepared to pay European prices and abandon current arrangements under which the price it pays for gas is offset by the cost of transporting supplies passing through its territory to European customers. But he says a transition period is needed to adjust to new prices.

Source: China Daily