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Moscow has postponed indefinitely planned Russia-Ukraine intergovernmental talks after Ukraine signed
Moscow has postponed indefinitely planned Russia-Ukraine intergovernmental talks after Ukraine signed a deal with the EU on modernizing the country's aging gas supply system, a source in the Kremlin said on Saturday.

"It is not a question of one or two weeks," the source said.

Earlier the Russian President Dmitry Medvedev said he was suspending talks until the issue had been resolved.

The cooperation pledge signed by Ukraine, the EU and a number of banks is aimed at encouraging investment and avoiding a repeat of January's gas dispute, which resulted in a temporary cut in Russian gas supplies.

Russia, which transits about 80% of its Europe-bound gas via Ukraine, reacted badly to the news accusing the EU of deliberately excluding it from talks.

Under the agreement, the EU endorsed Ukraine's plan to modernize its Soviet-era pipelines and underground storage facilities, and to build new gas metering stations. The EU pledged 2.5 billion euros ($3.4 billion) on the condition Kiev reform the sector to make it more open and transparent.

Foreign Ministry spokesman Andrei Nesterenko told reporters earlier that gas agreements signed between Russia, Ukraine and the EU in February on a format for future cooperation have been "clearly violated."

Ukrainian Prime Minister Yulia Tymoshenko attempted to calm the situation while on a visit to Japan on Thursday telling reporters that Russia would have a full role in the modernization of Ukraine's gas grid.

"I am certain that in the near future, all misunderstandings between Russia and the European Union will be cleared up, and Russia will become a full-fledged participant in these processes," the premier's press service quoted her as saying.


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