Russian gas giant Gazprom cut down natural gas supply to Ukraine and accused Kiev of siphoning off gas going through Ukraine to European clients on Sunday after Kiev shrugged off Moscow's demand to more than quadruple the gas price.

Gazprom began lowering pressure in the pipelines to Ukraine at 9:40 a.m. (0640 GMT) and has cut down gas exports to Ukraine by 120 million cubic meters a day, Gazprom spokesman Sergei Kupriyanov was quoted by the Itar-Tass news agency as saying.

The company also accused Ukraine of tapping gas intended for European clients as Russia continued to supply 360 million cubic meters a day to Europe via Ukrainian territory.

Instances of Ukraine siphoning off Russian gas were recorded and details will be available on Monday, Kupriyanov said.

But Ukraine denied the allegation.

"We have not consumed a single cubic meter of Russian gas," Ukrainian Prime Minister Yuriy Yekhanurov was quoted by the Interfax news agency as saying.

MARKET PRICE

Gazprom's cutback capped a bitter months-long dispute between the two countries over the gas price.

Ukraine was buying Russian gas at 50 U.S. dollars per 1,000 cubic meters over the past year, but Gazprom has asked Ukraine to pay 230 dollars, saying the price hike was needed to conform to world gas price levels.

Late Saturday, President Vladimir Putin approved a three-month freeze on the gas price for Ukraine, ordering Gazprom to supply gas at last year's price for the first quarter of 2006 if Ukraine accepts a price hike starting in the second quarter.

Gazprom said shortly after the mid-night deadline on the offer expired that Ukraine formally refused the offer.

"After a meeting with the Russian president, Gazprom's chairman sent a signed contract for gas supply and transit in 2006 to Ukraine's oil and gas company Naftogaz Ukrainy," Kupriyanov said. "The official word from Ukraine was they cannot sign it."

Ukrainian President Viktor Yushchenko reiterated his position on Sunday that his country is prepared to pay the market price but 230 dollars per 1,000 cubic meters is unacceptable.

Following the collapse of talks, the Russian Foreign Ministry accused Ukraine of deliberately blocking progress in negotiations on gas deliveries.

"Our impression is that the Ukrainian authorities do not feel confident and have decided to deliberately disrupt the negotiating process with Russia," the ministry said.

EUROPE JITTERS

Poland's gas monopoly PGNiG said on Sunday its natural gas supply has been affected by Russia's move to halt gas deliveries to Ukraine.

"Today at 11:00 am (1000 GMT), PGNiG was informed by the National Gas Directorate of a fall in pressure at the connection point at the Polish-Ukrainian border at Drozdowicze," PGNiG said in a statement.

"This indicates a fall in supplies originating in Ukraine and is a consequence of the decision by Russia's Gazprom to restrict deliveries of Russian gas to Ukraine," which could affect 14 percent of Poland's total natural gas volume, the statement said.

Gazprom provides about half the gas consumed in the European Union (EU) and some 80 percent of that amount is sent through pipelines that cross Ukraine.

EU energy officials are set to convene an emergency session on Wednesday to discuss the gas supply situation of the 25-nation bloc.

At the same time, Russia sought to calm the Europeans over a feared disruption of gas flow and urged Ukraine to observe its obligations in transiting gas for Europe.

"Russia will rigorously fulfill all of its agreements and contracts on natural gas delivery that Russia signed with EU partners and other European countries," the Foreign Ministry said.

"We hope Ukraine will ... guarantee the uninterrupted transit of natural gas intended for EU countries via its territory," it said.