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Russian gas giant Gazprom began cutting off gas supply to Ukraine on Sunday after Kiev rejected the final offer from Russia on gas deliveries in 2006.

Gazprom begun reducing pressure in the pipelines to Ukraine at 09:40 AM (06:40 GMT) but gas exports to Europe via Ukraine is proceeding in full, Gazprom spokesman Sergei Kupriyanov was quoted by the Itar-Tass news agency as saying.

The European Union buys 25 percent of its gas supplies from Gazprom, most of which transited through Ukraine.

Ukraine's national oil and gas company Naftogaz Ukrainy confirmed later that pressure in the national gas pipeline was going down.

"The information I have indicates it's getting lower," Eduard Zanyuk, spokesperson for Naftogaz Ukrainy, was quoted by Itar-Tassas saying.

The cutoff capped a bitter dispute over gas supply that saw Ukraine stand defiant to a Russian demand to more than quadruple the price of gas for Ukraine.

Ukraine was buying Russian gas for US$50 per 1,000 cubic meters for the past year, but Gazprom has asked Ukraine to pay more than quadruple this price and offered cash payments for the transit of its gas to European clients.

Late Saturday, President Vladimir Putin approved a three-month freeze on the gas price for Ukraine, ordering Gazprom to supply gas at the current price for the first quarter of 2006 if Ukraine accepts a price hike starting the second quarter. Putin said the offer would only be valid until the end of the day.

Gazprom said shortly after the deadline expired that Naftogaz Ukrainy had refused to sign a contract that contained Putin's offer.

"We believe it will be extremely difficult, or impossible, to be more precise, for the Ukrainian authorities to explain to theirpeople the reason for such a short-sighted policy," Kupriyanov said.

(Xinhua News Agency January 2, 2006)