Russia will cut off Ukraine's gas pipeline after talks between the countries failed amid threats that the pipeline to Western Europe could be shut down.

The Russian Gazprom monopoly announced that its engineers had started preparations to turn off gas to Ukraine at 10am today, claiming that the Government in Kiev had refused to sign a new contract by the midnight deadline.

Vladimir Putin, the Russian Prime Minister, could barely conceal his fury that Moscow was once again being made to appear in Western eyes as an unreliable energy supplier in the depth of winter.

Reporting to President Medvedev, Mr Putin said that despite Russia’s offer of a below-market price for gas in 2009, Kiev had not only rebuffed Moscow but also threatened to disrupt onward supplies to Western Europe.

According to Mr Putin, Ukraine had been offered a price for gas of $250 per 1,000 cubic metres, a big increase on the $179.5 it had been paying but significantly lower than the free market price of $418.

“Our Ukrainian partners have officially notified us that, in case no contract is signed on gas supplies for Ukraine itself, it will block the transit of our product to principal consumers in Western Europe,” Mr Putin said.

“We believe that this is an absolutely improper position both from the economic and from the legal point of view.”

If transit agreements were breached there would be “serious consequences” for Ukraine and “consumers in European Union countries”, he added.

In Kiev, Naftogaz, the state energy company, confirmed that the Ukrainian delegation had left Gazprom headquarters in Moscow and was returning to Kiev.

Mr Putin claimed that charitable motives lay behind the latest offer, which Ukraine was reported to have thought too greedy in light of falling world energy prices.

Russia’s relations with Ukraine have been rocky over Kiev’s aspirations to join the EU and Nato. They deteriorated further last summer when Moscow perceived Kiev as being sympathetic to Georgia in the war over South Ossetia.

Russia says that the cut-off does not apply to shipments beyond Ukraine but there could be a knock-on effect if it causes a drop in pressure in the transit pipelines or if Kiev halts flow to Western Europe as a bargaining chip in its dispute. The EU is anxious to avoid a repeat of what happened in January 2006 when, in a similar row, Moscow cut off supplies to Ukraine, causing a fall in gas pressure farther in the West.

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