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Russia Raps Ukraine Over EU Gas Investment Pitch


MOSCOW/ KYIV (Reuters) -- Russia has broken off talks with Ukraine after Kiev angered the Kremlin by asking European Union investors to help modernize its gas pipeline network, which supplies one-fifth of Europe's gas.

The spat over investments in Ukraine's gas pipeline network has revived fears of a repeat of the January gas dispute between Russia and Ukraine, when major EU customers were left without gas for nearly two weeks in the dead of winter.

European officials on March 23 welcomed a Ukrainian plan to modernize its gas network, but Russia is dismayed that it was not included in the discussions.

Prime Minister Vladimir Putin threatened to review ties with the European Union and officials warned that the risk of gas supply disruptions would rise, if Russian interests were ignored.

President Dmitry Medvedev said Russia has postponed talks with Ukraine's government and that Moscow has a number of questions about the EU-Ukraine gas discussions.

"We had planned to hold intergovernmental consultations next week," Medvedev told a meeting of senior officials at the Russian Security Council.

"We need to think about postponing them. Such consultations will take place only after the Russian side clarifies a number of issues," he said. "Russia has... number of questions about the final declaration."

Ukrainian Prime Minister Yulia Tymoshenko said the overhaul of the gas transit system was not aimed against Russia.

"Neither Russia nor Europe lost yesterday. Ukraine simply defended its national interests," Tymoshenko told a news conference. "Russia can also take part in investment projects, in reconstruction, and modernization."

But the force of the Russian reaction indicates the sensitivity of the big power efforts to gain leverage over Ukraine's gas pipeline network.

A Ukrainian source close to gas talks said negotiations between Gazprom and Ukraine's state gas company, Naftogaz, could be complicated by Russia's reaction to the pipeline plan.

"All this may significantly complicate talks between Naftogaz and Gazprom," the source said.

The two companies are in talks on the price Naftogaz will have to pay for gas in the second quarter of this year.