Europe Natural Gas Deal Done? NYET!

By Christian Lowe and Dmitry Zhdannikov

MOSCOW/KIEV, Jan 12 (Reuters) - A deal to restore Russian gas supplies via Ukraine to Europe appeared on the verge of collapse after Moscow rejected additions by Kiev as a 'mockery of common sense'.

Russian President Dmitry Medvedev appealed to EU leaders late on Sunday to exert influence on Kiev to withdraw the annotations. Government sources said Prime Minister Vladimir Putin had proposed sending officials to Brussels on Monday for emergency talks.

Ukraine, its own supplies cut off in a dispute with Moscow over the price it pays for Russian gas, signed an agreement on Sunday allowing monitors to check gas flows across its territory to Europe and assuage Russian fears Kiev would siphon off gas for itself. But it appended its own declaration to the deal Russia had signed a day earlier.

The European Union was also party to the deal and EU monitors had already begun arriving when the new dispute flared.

"I cannot call such stipulations and additions other than a mockery of common sense and violation of earlier achieved agreements," Medvedev said of the Ukrainian terms.

"These actions, in fact, aim to disrupt the existing agreements on monitoring gas transit and are clearly provocative and destructive in essence ... I therefore order the government not to implement the document signed yesterday."

His statement sparked a new flurry of diplomatic activity. The European Commission said its chief, Jose Manuel Barroso, and Ukrainian Prime Minister Yulia Tymoshenko had agreed to address Russia's concerns.

BROADER TENSIONS

The commercial dispute over gas prices has played out against a background of broader tensions between Ukraine, seeking to join the NATO alliance, and its giant northern neighbour.

Russia cut off all gas via Ukraine to Europe last week. The EU, which gets a fifth of all its gas supplies via that route, has found itself playing arbiter in a bitter power-play between two ex-Soviet states still acting out a separation.