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Ukraine reassures public after Russian gas cut

Ukraine rushed on Tuesday to assure a jittery public it would not suffer from Russia's latest gas cut and sent a team to Europe to bolster energy ties.

KIEV: Ukraine rushed on Tuesday to assure a jittery public it would not suffer from Russia's latest gas cut and sent a team to Europe to bolster energy ties.

The delicate mission came as lawmakers prepared to call on Kiev to declare martial law in two separatist eastern regions where a 10-week insurgency has claimed more than 320 lives.

The latest violence in the heavily Russified rustbelt saw the border guard service report the injury of 31 soldiers in mortar fire attacks.

The pro-Russian uprising has threatened the survival of the ex-Soviet state and put East-West relations under pressure not witnessed since the Cold War.

The Kremlin has denied fomenting the unrest. But its March seizure of Crimea and border troop movements were followed on Monday by a fuel stoppage that Kiev called "another stage of Russia's aggression against the Ukrainian state".

The head of Ukraine's indebted state energy firm Naftogaz said consumers -- already facing unpopular social benefit cuts being adopted under the terms of a massive IMF rescue loan -- would be shielded from Russia's punitive step.

"I think that normal users will not be affected in any way," Naftogaz chief Andriy Kobolev said in televised remarks.

Weeks of acrimonious debt and price negotiations broke up on Monday with Russia walking away from a compromise solution proposed in Kiev by the European Union's energy commissioner.

Ukraine receives half its gas from Russia and transports 15 percent of the fuel consumed in Europe -- a dependence that has not diminished despite similar supply disruptions in 2006 and 2009.

Russia imposed the cut after Ukraine balked at making a $1.9-billion (1.4-billion-euro) debt payment in protest at Moscow's decision to nearly double Kiev's rates in the wake of the February ouster of a Kremlin-backed president.

A gas shortage is not expected to felt in either Ukraine or Europe for several months.

Ukraine has bolstered its underground storage volumes and analysts believe that Europe's own reserves are nearly full.

But Kiev is seeking to devise a longer-term solution that would eliminate a need to maintain an alliance with Russia to secure gas prices it can afford.

Prime Minister Arseniy Yatsenyuk said on Tuesday that a team headed by Kobolev and Energy Minister Yuriy Prodan was flying to Budapest to negotiate "reverse-flow" deliveries along pipelines now used for transporting Russian gas west.

"Our volumes of reverse-flow shipments are insufficient to provide Ukraine with gas. But when we start large-scale reverse supplies... we will see real diversification," he said.

But European utilities have for the most part refused to complicate their relations with Russian energy giant Gazprom by selling Russia's own gas back to Ukraine at a price lower than that imposed on Kiev by Moscow.

European companies "do not have the right to do that," Gazprom chief executive Alexei Miller told Russia's RIA Novosti news agency on Monday.

Ukraine's President Petro Poroshenko said on Monday he hoped impose a ceasefire once troops regain control of the Russian border and stop the flow of arms and gunmen into the conflict zone.

The 48-year-old confectionery tycoon promised to accomplish that uneasy goal by the weekend and then launch talks with peaceful separatists.

But lawmakers want him to go much further and declare martial law -- a step Poroshenko has resisted out of fear of fanning pro-Russian sentiments in the east.

Parliament was expected to adopt a non-binding motion calling on Poroshenko to take that emergency measure immediately.

But a separatist leader in the Donetsk region -- the epicentre of fighting where militants on Monday briefly seized local central bank -- said no talks with Poroshenko were possible without Moscow's direct involvement.

"The time for bilateral negotiations has passed," Andriy Purgin told Russia's Interfax news agency.

Most economists do not expected gas negotiations with Russia to resume in earnest for several more months.

"We believe that the parties will renew negotiations closer to the autumn," said Moscow's VTB Capital investment bank.

But economists believe Kiev will face strong European pressure once gas supplies dwindle because EU nations do not want Ukraine to tap shipments intended for Russia's western clients.

"Europe will be particularly concerned... recalling the winter 2009, when Ukraine illegally used gas earmarked for Europe for its own purposes," said Moscow's Alfa Bank economist Olga Petrova.

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