Putin tells EU: You may have to pay to keep gas flowing

EUROPE should "open its wallet" if it wants to avoid a gas crisis this winter, Russian prime minister Vladimir Putin said yesterday, after warning that supplies to the West could be hit if transit country Ukraine could not pay its energy bills.

"If there are problems, we are asking our European colleagues to get involved and lend Ukraine the necessary money. Give them a least a billion. Why be greedy? They (the EU] have the money, so why don't they fork it out?" Mr Putin said.

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A political crisis in Ukraine has also complicated matters.

With president Viktor Yushchenko and prime minister Yulia Tymoshenko at each others' throats in a bitter struggle ahead of presidential elections in January, energy has become a political football.

Hryhory Nemyrya, the deputy prime minister, has already accused Mr Yushchenko of undermining Naftogaz's ability to pay by campaigning against spending cuts.

Mr Putin has also entered the fray by accusing the Ukrainian president, a long-time opponent to Moscow, of risking disruption by allegedly interfering in Ukraine's central bank.

Energy experts point to conflicts between powerful groups in both Ukraine and Russia as another source of friction that threatens supply. "The heart of the matter is a dispute between oligarchs that are trying to capture a very lucrative market," Jerome Guillet, an energy expert concentrating on Eastern Europe, told The Scotsman.

"It is very hard to know what is going on, and the fact that you have a highly unstable situation in Ukraine, with maybe three clans fighting it out, and in Russia you have at least two clans in the Kremlin, makes for a very unstable situation."