European gas supplies are set to suffer further disruption after the payment dispute between Russia and Ukraine worsened yesterday when Vladimir Putin ordered further cuts to punish Kiev.

Ten countries have reported reduced gas flows from Ukrainian pipelines delivering from Gazprom, the Russian state company, and European Union ambassadors forecast more cuts of up to 20 per cent at a private meeting yesterday, The Times understands.

Mr Putin's order to further reduce supplies came after Alexei Miller, the head of Gazprom, informed the Russian Prime Minister that Ukraine was “stealing” gas intended for European countries, a charge that Kiev denied.

Gazprom ceased its supply of gas for Ukraine on New Year's Day after the two sides failed to reach a new agreement on payment rates, with the Russians demanding a substantial price increase to what it says are market rates. Four fifths of EU gas from Russia goes through Ukraine and several countries reported lower pressure yesterday, with deliveries to Romania, Bulgaria, Greece, Turkey and the Former Yugoslav Republic of Macedonia down by almost a quarter, on average.

While Moscow insists that the dispute is purely commercial, some analysts see Russia applying strategic pressure to make the case to build a more southerly pipeline or even to try to topple the pro-Western President Yushchenko.

The European Commission said that reserves of gas in the EU were high enough to meet consumer needs for weeks, but the cold snap across Europe is expected to increase demand sharply and led Bulgaria to appeal to its industry to cut usage.

Mr Miller told Mr Putin that Ukraine had allegedly stolen 65.3 million cubic metres of gas since January 1 that was supposed to have crossed its territory to Europe.

“What do you propose to do about it?” a grim-faced Mr Putin asked, in pictures broadcast from his residence.

Mr Miller replied: “There is a suggestion that the gas ... be reduced by the amount that has already been stolen and then reduced each day by whatever amount may be stolen .” The Gazprom chief said that the debt owed by Ukraine to Gazprom was more than $600 million (£410 million), but added: “If they continue to illegally take gas, it will soon be billions.” He said that supplies to Europe would be kept up through pipelines crossing Belarus, Poland and Turkey. Ukraine, which is using its own reserves of gas, said that it was simply taking enough to maintain the necessary pressure in the pipes.

The price offered by Russia on New Year's Eve was $250 per 1,000 cubic metres, which Mr Putin described as “humanitarian”. Since Kiev refused to pay more than $235, Moscow is playing hardball and demanding a full market price of $450.

Ukraine retaliated over transit fees yesterday. Kiev's Economic Court banned Naftogaz Ukrainy, the Ukrainian gas company, from using the 2008 transit rate of $1.6 per 1,000 cubic metres. Moscow said that it did not recognise the Kiev court.

A delegation of Brussels officials and diplomats from the Czech Republic, which holds the rotating EU presidency, have arrived in Kiev to begin talks on the gas crisis and want to meet Gazprom officials today or tomorrow. A spokesman in Brussels said, however, that the EU regarded the issue as a bilateral dispute and was not trying to mediate.

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