KIEV, March 5 – Ukraine on Thursday paid in full for Russian natural gas supplies in February, meeting the deadline and averting a major escalation following a threat of supply cutoff from Prime Minister Vladimir Putin.

Naftogaz Ukrayiny, the national oil and gas company, channeled $50 million to Gazprom as the last installment of the $360 million payment for gas supplies in February. Gazprom confirmed receiving the payment in full.

The last transaction comes hours after Putin had warned that Russia would cut off natural gas to Ukraine -- and to much of Europe -- if Naftogaz fails to make the payment by Saturday.

The threat came as a chilling reminder of the three-week standoff between Ukraine and Russia in January that had resulted in gas supply disruptions throughout much of Europe.

Putin’s threat appears as a surprise for many, including those in the European Union, who have believed that Moscow would seek to improve its image as a reliable gas supplier worsened by the January conflict.

According to the contract between Naftogaz and Gazprom signed on January 19, the Russian company is allowed to demand a prepayment for future gas supplies if the Ukrainian company fails to make the timely payment.

But Putin’s threat of the gas supply cutoff - apparently not anticipated in the contract for the first delayed payment – shows that Russia is ready to unliterary and arbitrarily impose a much harsher punishment that would automatically affect the European Union.

Putin made the comments in remarks televised by the Russian television reacting to an ongoing investigation at Naftoagz Ukrayiny by the Ukrainian security service SBU.

SBU investigates the alleged $2.7 billion natural gas fraud that could have been caused by a deal signed by Naftogaz and Gazprom on January 19. The deal was politically brokered by Putin and by his Ukrainian counterpart Yulia Tymoshenko in Moscow.

“Ukraine's intelligence services that raided Naftogaz headquarters in Kiev Wednesday had been trying to seize the transit contract between Gazprom and Naftogaz," which secures the transit of Russian gas to Europe, Putin said.

"They want to seize the original hard copy of the transit contract," he said, adding that he would like "to direct the attention of the European Commission and all our consumers to this."

"We are considering the events as [an] internal affair of Ukraine
but cannot help brining attention to possible negative consequences of the ongoing events to energy supplies to consumers in Ukraine and outside of it," Putin said.

Ukraine imported 1 billion cubic meters in February, a half of what it had been originally planned to import, as contracting economy had been cutting demand for energy.

The rapidly falling demand for gas forced Naftogaz to seek a reduction in overall gas supplies from Russia to 33 billion cubic meters in 2009, down from 40 billion cubic meters originally planned, according to Naftogaz. (tl/ez)