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EU Wants Assurances From Ukraine On Gas Supplies

Ukrainian President Viktor Yushchenko
KYIV (Reuters) -- European Union officials will seek assurances from Ukraine that it will avoid a repetition of a clash with Russia in the New Year like the one a year ago that led to cuts in gas supplies.

The two sides will meet for their annual summit and EU patience with Ukraine is wearing thin after a year that began with a winter "gas war" that left millions of Europeans without heating and continued with political infighting and broken promises of reform.

President Viktor Yushchenko, who swept to power in the 2004 pro-Western Orange Revolution, wants Ukraine to become an EU member and the country is in the process of negotiating an association agreement which would open the door to free trade.

No breakthrough in the agreement is expected soon and the EU said this week its officials "will call on Ukraine to give renewed impetus to reform efforts while at the same time welcoming the further deepening relations."

The EU's top official in Kyiv signalled this week an agreement was still some way off and would be sealed only once the former Soviet state's business elite appreciated the benefits of true competition.

The EU's new foreign affairs chief, Catherine Ashton, will not attend the meeting. European Commission President Jose Manuel Barroso, representatives of the Swedish presidency and outgoing External Relations Commissioner Benita Ferrero-Waldner will be present, however.

Ukraine's heavy industry has been reeling from the economic recession, millions are unemployed and more cannot pay their debts after the national currency lost half of its value, jolting Central European banks that had invested heavily here.

Discord between Yushchenko and his 2004 ally turned rival, Prime Minister Yulia Tymoshenko, have thrown policies off course and delayed for the second time a multi-billion-dollar bailout from the International Monetary Fund.

The EU, shocked that its citizens were affected by a gas dispute between two non-EU countries, has tried in the past year to help Ukraine's energy sector, particularly its financially ailing state firm Naftogaz.

It brokered a deal for loans worth $1.7 billion to help Kyiv pay for gas and modernize the sector, provided that the government raises the subsidised domestic gas price. Kyiv promised to comply, but failed to do so.

Brussels said it would lend $500 million to help the economy, but on condition the $16.4 billion IMF program was on track. The IMF suspended that process last month.