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Russia accused Ukraine of stealing gas destined for the rest of Europe on Friday, a day after cutting supplies to its neighbor in a contract dispute.

The volumes Russian export monopoly Gazprom said Ukraine was off siphoning were small, but the accusation suggested Moscow was in no mood for compromise in a re-run of a 2006 argument that led to supply shortages across the E.U.

Gazprom said it was responding to Ukraine’s actions by increasing exports via alternative routes, including Belarus. Energy companies in Europe said they had not felt any disruptions to their supplies since the cut-off.

"The Ukrainian side openly admits it is stealing gas and is not ashamed of this," Gazprom spokesman Sergei Kupriyanov said.

The European Union - which receives a fifth of its gas via pipelines through Ukraine - said it considered the dispute between Moscow and Kiev to be a bilateral issue and would not step in unless supplies to Europe started to suffer.

The dispute could raise new doubts about Moscow’s reliability as an energy supplier and fuel suspicions in the West - already running high since Russia’s war with Georgia last August - that the Kremlin bullies its pro-Western neighbors.

Russia denies politics are behind the dispute and says it is about prices and debts, but the two ex-Soviet neighbors have clashed over a drive by Ukrainian President Viktor Yushchenko to take his country into the NATO alliance.

If talks do resume between Ukrainian state energy company Naftogaz and Gazprom, the gulf between their negotiating positions is wide.

Gazprom spokesman Kupriyanov said Ukraine had agreed to ship 296 million cubic meters to Europe on Jan. 3, not the 303 million cubic meters that Russia had requested.

Ukraine had earlier said it was diverting 21 million cubic meters a day of supplies destined for Europe so that it could maintain pressure in its pipeline system and keep transit supplies flowing.

Energy firms in Hungary, Poland, Bulgaria and Turkey said on Friday their supplies were unaffected, echoing importers in most European countries who earlier reported they had not seen any drop in deliveries no fax cash advance.

Europe, where temperatures fell below freezing overnight, has enough gas stockpiled to manage without Russian supplies for several days but could face difficulties if any disruption stretched into weeks, analysts said.

"We are not going to interfere until the moment when the pressure of gas reaches some low limits," Czech E.U. presidency spokesman Jiri Potuznik said.

Alexei Miller, CEO of Gazprom, said on Thursday he wanted Ukraine to pay $418 per 1,000 cubic meters of gas, compared with the $179.5 Kiev paid in 2008. Ukraine says the most it can afford to pay is $235.

Gazprom charges about $500 per 1,000 cubic to customers in the European Union, though that is likely to fall by up to half this year. Gas prices track oil and crude has plummeted in value.

The E.U. is keen to avoid a repeat of a January 2006 dispute when Moscow cut off supplies to Ukraine, causing a brief reduction in gas deliveries to other parts of Europe in mid-winter.

Hungary’s Natural Gas Transmission Company, owned by energy firm MOL said it was keeping a close watch on supplies from Russia. "We have not seen a decline in pressure, it is in line with the contracted level," said spokeswoman Edina Lakatos.

Ukraine’s Naftogaz said it guaranteed uninterrupted supplies of Russian gas to Europe and that it was drawing the fuel from underground stockpiles to meet its own needs. Temperatures in Kiev were about 8 degrees Celsius below zero.

Russia says its dispute with Kiev is purely commercial. Squeezing more money from Ukraine is particularly pressing for Gazprom now as its finances have been hurt by the global financial crisis and gas prices are on the way down.

A protracted dispute is likely to hurt the Ukrainian economy, already reeling from a drop-off in investor confidence and steep falls in the hryvnia currency that have not been stemmed by an International Monetary Fund loan. 

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