Russia's natural gas monopoly Gazprom headquarters in Moscow, Sunday, Jan. 1, 2006

Russia began the process of cutting off natural gas supplies to neighboring Ukraine after talks failed to resolve a price dispute. Ukrainian officials say supplies to western Europe won't be affected.

The new year may not be a very happy one for people in Ukraine as Russia is cutting off their natural gas supply.

Russia's state-run gas company Gazprom ordered the move after talks aimed at finding a compromise over a price increase failed.

Russia wants to quadruple the price of the gas, arguing that Ukraine is now a market economy and must pay market rates.

Ukrainian officials say they are willing to pay a higher price, but the change must be adopted gradually in order to avoid a huge shock to its struggling economy.

Gazprom headquarters with a flag showing the company's logo on the foreground

They say there is enough gas in reserve to last through the winter, although industries might be affected if the cut off lasts a long time.

Gazprom spokesman Sergei Kuprianov says the authorities in Ukraine have only themselves to blame for that.

"Their refusal to meet our proposals for resolving the problem will have catastrophic consequences for the Ukrainian economy, and unfortunately for the brotherly Ukrainian people as well," he says.

The two countries have long had a barter arrangement in which Ukraine pays $50 per 1,000 cubic meters in exchange for the use of its territory for gas pipelines to Europe.

Russia says the new price will be $230, and insists the change is purely for economic reasons.

Ukraine counters that the tough stand by the Kremlin is punishment for the election of pro-Western President Viktor Yushchenko a year ago.

They point out that Russia is not raising prices for nearby Belarus, which has remained loyal to Moscow despite its pariah status in the West as a dictatorship.

Late on Saturday President Vladimir Putin offered to maintain the lower price until April if Kiev agreed to pay the higher one after that.

Ukrainian officials responded that talks to set a fair long-term price must continue.

Much of western Europe's gas supply passes through pipelines in Ukraine, but Gazprom officials say this will not be affected.

But analysts say Ukraine could siphon off some gas bound for Europe.