Georgia rejects Russian gas deal, braces for row

TBILISI, Nov 8 (Reuters) Georgia rejected a compromise deal with the Russian gas monopoly Gazprom on Wednesday, leaving it with the prospect of either paying twice the price for Russian fuel or having supplies cut off.

Moscow is locked in a bitter row with its ex-Soviet neighbour and has already severed transport links. A threat to gas supplies -- which Georgia depends on -- would dramatically ratchet up the standoff.

State-owned Gazprom says it wants Georgia in 2007 to pay 0 per 1,000 cubic metres of gas instead of the 0 it pays now. It says if no new contract is signed, supplies will be cut.

Gazprom offered to soften the increase if Tbilisi handed over control of its domestic gas distribution network to Russia.

Georgian Prime Minister Zurab Nogaideli rejected that offer.

''I want to repeat once again -- we are not going to bow to blackmail,'' he told a cabinet meeting.

Energy Minister Nika Gilauri, asked by reporters if Georgia might cede energy infrastructure to Gazprom, replied: ''Never.'' Russia supplies almost all of Georgia's gas needs. The Georgian government is seeking alternative suppliers but they are not ready to replace Russian gas in full.

Tbilisi says Moscow is using gas as a political tool to punish it for its pro-Western policies. Gazprom says the increase is purely commercial.

If the price stays at 0, Georgia -- where the average monthly income is just over 0 a month -- would pay the same for its gas as rich countries such as Germany and Italy.

''ENERGY BLACKMAIL'' U.S. Vice-President Dick Cheney accused Russia this year of energy blackmail after Gazprom cut off supplies to Ukraine, also in a row over higher prices.

Deliveries to Western Europe were briefly disrupted because the pipelines cut across Ukraine, jolting Western confidence in Russia's reliability as a supplier. Ukraine is due to pay 0 next year, under a deal not yet finalised.

In Georgia's case, the only other country that would suffer from a gas cutoff is Armenia, which imports its Russian gas via Georgia.

Russia imposed sanctions on Georgia last month after Tbilisi briefly detained four Russian soldiers it accused of spying.

The dispute tapped into long-running enmity over Tbilisi's drive to join NATO and the European Union and shake off the influence of its former imperial master.

Moscow props up separatist governments in two breakaway regions of Georgia. A Nov. 12 referendum on independence from Georgia in one of the regions, South Ossetia, could provide a new flashpoint.

Alarmed at the prospect of a gas cutoff, a leading Georgian opposition figure urged Nogaideli to seek a compromise.

''The prime minister should explain if his statement means Georgia will be left without gas this winter because for now there is no real alternative to Russian gas,'' Interfax news agency quoted lawmaker David Berdzenishvili as saying.

REUTERS DKS DB2002