Gazprom has extended the deadline for Ukraine to pay up its $US 1.5 billion gas debt or face its taps being turned off. Still, the company’s spokesman said they still doubted a deal could be reached, noting at the same time supplies to the rest of Europe

On the day Gazprom celebrated its 15th birthday with a concert at the Kremlin, its boss Aleksey Miller was across town at Gazprom headquarters locked in last-minute talks with Ukraine’s state energy firm Naftogaz.

They failed to settle the $US 1.5 billion Russia claims it's owed by Naftogaz but extended the deadline by 8 hours to 6 pm Tuesday.

If an agreement isn’t reached by then, Gazprom will begin cutting 25 per cent of its supplies to Ukraine.

Ukraine transits over three-quarters of Gazprom’s gas to the EU, where supplies were hit during the last price war two winters ago. Gazprom’s spokesman, Sergey Kupriyanov, insisted that wouldn’t happen this time.

“Gazprom will make every effort to ensure our European clients get all the gas they’re entitled to under contract. The Ukrainian side has also promised to allow transit in full from Russia to Europe, and we’ve hired an independent company to make sure this happens,” he said.

Ukraine’s new Prime Minister Yulia Timoshenko wants to renegotiate gas deals across the board with Russia, including the price it pays for Russian gas, the price it gets for transit, and new pipeline routes bypassing Russia.

Her rhetoric has lead the head of the Kiev-based Institute of Global Strategies to claim Timoshenko is deliberately fuelling a gas war with Russia for political gain.

The Ukrainian government’s negative stance lead Gazprom spokesman Sergey Kupriyanov to tell Business Today it was unlikely a deal would be reached. Gazprom’s export chief, though, remained optimistic, and chose to ignore Timoshenko’s comments.

“We are dealing not with people -with official representatives of governments. There's no politics inside, only economics. If we were not optimistic, we wouldn't be in this business,” said Gazprom Deputy CEO Aleksandr Medvedev.

Ukraine President Victor Yushchenko is in Moscow on Tuesday for talks with President Putin. The meeting is being seen as a last throw of the dice to prevent the start of another European gas war.