KIEV, Dec. 29 – Prime Minister Yulia Tymoshenko held an emergency meeting of the government Monday after talks between Ukraine and Russia had failed to produce a gas deal for 2009, threatening Ukrainians with a major price escalation within days.

The government has officially not issued a report on the meeting, but a person familiar with the situation told Interfax-Ukraine that the government had discussed the gas sector at the meeting.

The meeting was called shortly after Gazprom, Russia’s gas giant, had warned that Ukraine may be forced to pay $418 per 1,000 cubic meters in 2009, a price that many say would not be affordable.

Ukraine, banking on an oil price slump over the past six months, has been hoping to pay $100/1,000 cu m in 2009, down from $179.5/1,000 cu m in 2008. Ukraine’s 2009 budget is calculated based on the gas price of $250/1,000 cu m and any greater price would put major pressure on the budget.

Russian Prime Minister Vladimir Putin spent almost an hour on the phone with Ukrainian President Viktor Yushchenko, but said the two had failed to come to an agreement.

“I just spoke with Viktor Andriyovych [Yushchenko] for almost an hour, and we hadn’t had a deal yet,” Putin told a group of Russian reporters on Monday. “They don’t want to pay.”

Ukraine owes almost $2.1 billion for Russian gas supplies in 2009, including $805 million for gas supplied in November, $862 million for gas supplied in December and $450 million fine, according to Gazprom.

In the case of switching to market, European prices, the price for Ukraine should amount to $418 per 1,000 cubic metres, Alexei Miller, Gazprom's CEO, said Monday after talks with Naftogaz.

Viktor Zubkov, a former Russian prime minister who now chairs the board of directors at Gazprom, lashed out at Ukraine for the failure to pay the debt, and warned of the consequences.

"What are they thinking about? This is insanity in this situation to leave the country without deals for 2009," Zubkov told the Vesti, a Russian state-controlled television.

Zubkov said he had sent letters to European leaders warning them that Russia would deny the transit country further gas supplies if the debt was not settled by the end of this year.

He reminded EU leaders that Ukraine had been siphoning off Europe-bound gas in early 2006 after Russia was forced to cut off supplies to the country amid a pricing row.

According to Zubkov, Europe had agreed that "the ball is in Kiev's court."

The standoff comes even as Naftogaz Ukrayiny, the national oil and gas company, has paid off $1 billion in the gas debts over the past seven days, buying the hard currency directly from the National Bank of Ukraine.

Russia and Ukraine are gearing up for a fourth energy stand-off in as many years but have assured consumers in western Europe that supplies will not be disrupted, as happened during a 2006 dispute.

Yuriy Prodan, Ukraine’s energy minister, said there was still “hope” an agreement would be reached before New Year’s eve.

Gazprom met officials from Naftogaz, the Ukrainian state gas company, late on Monday but declined to comment on the talks. Russia has also suggested Ukraine could face a fourth stiff price rise in as many years, possibly double the current rate of $179.50 per 1,000 cubic metres.

Officials in western Europe, which receives a quarter of its supplies from Russia, mostly via Ukraine’s pipeline system, have urged Moscow and Kiev to find a compromise. (tl/ez)