MOSCOW - THERE is a '50-50' chance that Russia will cut off gas supplies to Ukraine on Jan 1 over Kiev's failure to pay its debts, Russian energy giant Gazprom said on Saturday.

'I think it's 50-50,' Gazprom spokesman Sergei Kupriyanov told radio station Moscow Echo in an interview, when asked if Russia would cut gas deliveries or the two sides would clinch a last minute deal.

Gazprom says that Ukraine's state gas company Naftogaz owes it over two billion dollars for gas delivered in November and December and fines for late payment.

It also says Kiev has warned Gazprom it will be unable to repay the debt by the end of the year as revenues from its gas consumers are insufficient.

This has paved the way for a showdown at New Year as Gazprom has said it will not sign a new contract with Ukraine unless the debts are settled in full.

Russian President Dmitry Medvedev told Ukraine's pro-Western government last week to pay up to the 'last ruble' or face gas cuts or even sanctions against its wider economy.

Mr Kupriyanov said negotiating efforts in the final days of the year would be focussed on ways for Ukraine to pay its debts through other means, such as the transit fees that Russia pays for sending gas across its territory.

'In the last days of the year we are trying to find ways other than monetary ones to settle these debts,' said Mr Kupriyanov. 'I hope that in the remaining days we will succeed in doing this.'

Disputes over Gazprom's desire to raise prices for Ukraine closer to those paid by Western European customers are also holding up negotiations.

Ukraine currently pays Russia US$179.50 (S$260) for 1,000 cubic metres of gas but Gazprom has warned that price could rise to US$400 for 1,000 cubic metres from next year.

'We cannot name and exact figure for 2009, but the price for Ukraine will be higher than the current level,' said Mr Kupriyanov.

He said if Ukraine's leaders really believed their statements that US$100 was an appropriate price for the gas then they could 'go on the market and buy it'.

Ukraine is a major transit country for Russian gas exports to the European Union and a dispute over gas prices led to a brief interruption of gas supplies in several EU countries in January 2006.

Gazprom has said it will fufill its obligations to Europe but has also warmed it cannot rule out disruptions to European supplies if Ukraine siphons off transit gas during a crisis.

Ukraine, which has tense relations with Moscow, is expected by analysts to plunge into recession next year as a result of the economic crisis and suffers from political turmoil amid a feud between its president and prime minister. -- AFP