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Russian natural gas giant Gazprom announced on Tuesday it would reduce
Russian natural gas giant Gazprom announced on Tuesday it would reduce gas supplies to Ukraine by a further 25% to half their normal level, due to an unresolved dispute over the country's debt.

On Monday Gazprom cut supplies to Ukraine after failed talks on the country's outstanding debt of around $600 million, and on contracts for 2008 supplies. Both Ukraine and Gazprom said supplies via Ukraine to the European Union were continuing in full.

Gazprom spokesman Sergei Kupriyanov told a news conference: "A decision has been made to reduce supplies by another 25% from 8 p.m. Moscow time (17:00 GMT) on Wednesday due to lack of progress in talks and on contracts for gas already supplied."

Gazprom, the world's largest gas producer, last slashed supplies to Ukraine at the start of 2006, causing temporary shortfalls in some European countries amid freezing temperatures. Since then, ongoing gas disputes between the ex-Soviet neighbors have sparked concerns in the EU over the stability of supplies from the region. Around a quarter of the EU's gas needs are met by supplies pumped via Russia through Ukraine's pipeline system.

Ukraine's national energy company Naftogaz said on Monday that gas had already been reduced by more than the quarter announced by Gazprom, and had fallen by 35%, or 46 million cubic meters per day. Ukraine normally receives around 130 million cubic meters daily.

The reduction came a day after Gazprom's board chairman, Dmitry Medvedev, won a landslide victory in the Russian presidential election. He will assume office in two months' time.

The Ukrainian government accused Gazprom on Monday of failing to pay transit fees, while the company blamed Ukraine for failing to send invoices.

"Since December Russia's Gazprom has not paid Naftogaz a single kopek for the transit of Russian gas," Ukraine's first deputy prime minister, Oleksandr Turchynov, said on national television.

Since Monday's supply cut, independent observers have been barred from entering gas metering stations in Ukraine, according to Gazprom.

Gazprom spokesman Kupriyanov called for the dispute to be swiftly resolved.

"We are inviting Ukraine to resolve all the disputed issues at the negotiation table as soon as possible," he said.

"Gazprom is a reliable supplier, but it cannot deliver gas without payment. The debt for gas supplied to Ukraine has not been repaid as of today. Ukraine is continuing unregulated gas consumption. New contracts have not been signed."

He said that 1.9 billion cu m of gas worth some $600 million had been illegally consumed by Ukraine.

Gazprom sells gas to Ukraine under a complex scheme involving two intermediaries, exporter RosUkrEnergo and importer UkrGazEnergo. Most of the gas is pumped from Central Asia. Ukrainian Prime Minister Yulia Tymoshenko, a leader of the 2004 "orange revolution" that saw Kiev move out of Moscow's sphere of influence, has called the two intermediaries "corrupt", and blamed them for debt dispute. RosUkrEnergo is half owned by Gazprom.

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