Russia may cut Ukraine's gas on Jan.1.
The Russian president has warned that Ukraine could face sanctions if it does not pay off its gas debt to Moscow 'to the last ruble'.

"The money must be paid until the last ruble if they do not want their economy to be hit by demands and sanctions from the Russian Federation," Dmitry Medvedev said in an end of year television interview on Wednesday.

Russian energy giant Gazprom also said on Wednesday that it would cut off gas supplies to Ukraine on January 1 if a new contract was not signed for 2009.

Ukraine is the main transit route for Russian gas exports to the European Union member-states. A similar dispute over gas prices led to a brief disruption of supplies to several EU countries in 2006.

"If a contract for 2009 is not signed then we are not going to deliver gas without a contract," Gazprom spokesman Sergei Kupriyanov told reporters. "When there is no contract we cannot realize deliveries. The situation is not simple. It is even critical."

Medvedev said Ukraine must pay off its gas debt 'to the last ruble'.
Kupriyanov, however, stressed that the dispute would not disrupt gas deliveries to Europe. "We will deliver the full volume of gas destined for transit and we will fulfill all our obligations towards European consumers," he said.

The spokesman said Ukraine owed Russia USD 1.67 billion for gas and USD 450 million in penalties for late payments in November and December.

Kupriyanov further denied Ukrainian President Viktor Yushchenko's earlier remarks that an agreement had been reached on rescheduling the repayment of the debt.

"To our frank question if they would pay by the end of the year, we received a frank answer -- 'No'," he said.