Russia's natural gas monopoly Gazprom headquarters Moscow, Russia, Wednesday, Dec. 31, 2008.... 
(AP)
Russia's gas monopoly Gazprom cut all natural gas supplies to Ukraine on Thursday morning after talks broke down over payments for past shipments and a new energy price contract for 2009.
Gazprom officials said the cuts began as planned at 10 a.m. (0700GMT and 2 a.m. EST) and the Ukrainian gas company Naftogaz confirmed a steady drop in supplies.
The festering dispute between the two uneasy neighbors raised fears that a cutoff could lead to a repetition of the January 2006 gas crisis, when a similar dispute between Russia and Ukraine briefly interrupted gas shipments to many European countries.
Europeans get about a quarter of their gas from Russia, and Ukraine controls the pipelines through which Russia supplies most of its customers in Europe. Natural gas is used for heating and to generate electricity, and the cutoff to Ukraine comes as Europe approaches the depths of winter.
While cutting gas to Ukraine, Gazprom said it also increased the amount of gas pumped through pipelines that mainly serve Europe.
Russian Prime Minister Vladimir Putin has warned Ukraine against diverting gas intended for other customers, saying that could have "quite serious consequences for the transit country itself" by damaging relations with Europe.
Ukraine's president and prime minister issued a statement saying they would guarantee the uninterrupted transit of natural gas through Ukrainian territory to Europe.
However, the Ukrainian president's energy adviser said it appeared that Gazprom had reduced supplies by more than Ukraine's quota of the deliveries and was not shipping enough to satisfy European customers. Despite this, Ukraine was fulfilling its obligations to deliver gas westward, Bohdan Sokolovsky said Thursday.
It was not possible to confirm his observations.
Naftogaz director Oleh Dubina has said Ukraine has enough gas in reserve to last it through early April.
European countries also have built up their gas storage since the 2006 crisis and would be unlikely to see any disruption for several weeks, said Chris Weafer, chief strategist at Uralsib bank.
