KIEV, March 24 – Russia on Tuesday postponed indefinitely talks with Ukraine on a number of economic and trade issues in apparent reaction to the country’s plans for closer cooperation with the European Union in the energy sector.

Prime Minister Yulia Tymoshenko planned to visit Moscow in early April for the talks with her Russian counterpart Vladimir Putin, but the meeting will now be postponed, Russian President Dmitry Medvedev said.

“We must consider postponing the talks,” Medvedev said at a meeting of the Security Council, Russia’s top security body, on Tuesday. “These talks will take place after we clarify respective issues that have just come up.”

The development underscores a major aggravation in relations between Russia and Ukraine following the Monday international investment conference in Brussels aimed at modernization of Ukrainian gas pipelines.

The declaration, approved at the conference, calls for providing $2.5 billion for the modernization, but perhaps more importantly it may open the possibility for the EU to start purchasing Russian gas at the border between Russia and Ukraine.

These plans angered the Russian delegation in Brussels so much that it had left the conference early, launching a PR-attack on Ukraine and the EU, and threatening with possible gas supply complications.

Putin held a special press conference late Monday to call the declaration “ill-considered” and “unprofessional,” and warning that it may have serious long-term consequences.

Both, Russia’s foreign ministry and the energy ministry, issued statements attacking the declaration and warning that Russia may have to revise long-term contracts for gas supplies with most of its customers, including Ukraine and the EU.

The scale of Russia’s response to the plans suggests not only economic issues are at stake, but also some important political issues nursed by the Russians may be in jeopardy.

The idea of the EU potentially buying Russian natural gas at the border between Ukraine and Russia – not at the border between Ukraine and the EU - was first mentioned by Ukrainian leaders in the middle of the gas dispute in January.

Since Russia accused Ukraine of stealing Europe-bound gas as the reason for suspending gas supplies to the EU on January 7, the idea would allow the European companies to buy gas directly from Russia and move it through Ukraine.

This would de-facto include Ukraine into the European energy sector as a partner and perhaps eliminate the need for building two hugely expensive gas pipelines bypassing Ukraine, Nord Stream and South Stream, across the Baltic Sea and the Black Sea, respectively.

Russia has been pressing heavily over the past five years for the construction of these two pipelines, which many analysts said would probably make Ukraine even more politically dependent on Russia.

But the EU’s declared commitment to the modernization of the Ukrainian gas pipelines, and plans to increase it capacity by 60 billion cubic meters/year to 180 billion cubic meters/year shows the EU plans to rely on Ukraine as the main gas supply route for decades to come.

Tymoshenko, who has made last year a number of policy moves, including in the energy sector, pleasing Russia, on Tuesday sought to assure Moscow that Ukraine will invite Russia to participate in the modernization of the pipelines.

“Don’t think that something bad was done against Russia,” Tymoshenko said at the press conference. “Russia may participate in the investment projects, modernization and reconstruction.”

“I know that yesterday it was not everything that the Russian delegation had liked. But perhaps Russia did not like that Shakhtar (a Donetsk-based Ukrainian soccer team) had recently won over CSKA (of Moscow). This is not the betrayal of Russian national interests,” Tymoshenko said. “This is simply a victory.”

“By the same token, neither Russia nor Europe lost yesterday. Ukraine simply decently and clearly defended its national interests and its main gas transit pipeline route,” Tymoshenko said. (tl/ez)