Russia has scrapped January oil exports via Ukrainian ports and also said it fears Ukraine will have problems paying for its gas, a sign of a possible repeat of New Year gas rows which have led to supply cuts in Europe.

Europe, which receives 25 percent of gas from Russia, was left short of supplies in January 2006 and 2009 because of pricing rows between Moscow and Kiev.

Another key transit state, Belarus, cut Russian oil flows to Europe in January 2007, also due to a pricing row, which further undermined the image of Russia, the world's largest oil and gas producer, as a reliable energy supplier.

Analysts have said Moscow is unlikely to be tough on Kiev this year ahead of Ukraine's presidential election in January in the hope Ukraine chooses a relatively pro-Russian leader.

Ukraine has been regularly paying its gas bills this year, but the December bill, due before Jan 11, was expected to soar to billion from 0 million in November due to low temperatures.

However, despite the expected rise in cold weather demand, Russian gas export monopoly Gazprom (GAZP.MM) said on Friday Ukraine had cut gas purchases in recent days.

"We assess the situation with payments for Russian natural gas deliveries in December as very alarming," Gazprom's chief executive Alexei Miller told state television.

"In the middle of December, there was a trend of a reduction of gas off-take which confirms that Ukraine is facing serious difficulties with (future) gas payments," Miller said.

NO CRUDE FOR YUZHNY

Russia ships 80 percent of its gas transit to Europe via the territory of Ukraine while the rest goes via Belarus.

Russian oil transits via Ukraine are less big but are still very important for the Mediterranean markets.

Traders said on Friday Russia's pipeline monopoly Transneft told oil firms to scrap oil export plans via Ukraine's Black Sea port of Yuzhny and gave no reason for the move.

"All volumes have been taken away. There will be no supplies in January (from Yuzhny)," said one trader, who asked not to be named because he is not allowed to comment on the issue.

"It will become clear on Monday what options will be proposed (by Transneft)," said another trader.

Oil firms will have to divert some 0.5 million tonnes of crude meant for Yuzhny to other destinations - such as Russia's Black Sea port of Novorossiisk or Primorsk on the Baltic.

Affected firms will include Rosneft (ROSN.MM), TNK-BP (TNBPI.RTS) and Tatneft. One cargo was already sold to Morgan Stanley for Jan 8-12 delivery and rerouting it to another port will cause big logistical problems, traders said.

Yuzhny remains the last Ukrainian port through which Russia sends transit crude to the West after it stopped exporting crude via another outlet - Odessa - earlier this year. In 2008, Odessa and Yuzhny sent over 15 million tonnes of Russian transit crude - enough to feed a large refinery for a year.

26 December 2009