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MOSCOW, Russia (CNN) -- Russia's state-owned natural gas monopoly Gazprom has halted deliveries of natural gas to Ukraine, according to the Russian news agency Interfax.

Gazprom said it shut off supplies after Ukrainian officials said they would not sign a new gas price agreement proposed by Russian President Vladimir Putin.

Gazprom, which supplies around one third of Ukraine's natural gas, has increased the price of gas from around $50 per 1,000 cubic meters of natural gas to $230 per 1,000 cubic meters of gas -- a four-fold increase.

Ukrainian officials have balked at the price hike, and see the increase as Russia's attempt to penalize the former Soviet republic for its Western-leaning foreign policy.

Putin offered a last minute compromise, calling for gas prices to be frozen at the old level for the first quarter of 2006 if Ukraine agreed to price increases after that.

Gazprom officials said they were told by Ukraine that they would not sign the compromise agreement. That offer expired with the coming of the new year.

A spokesman for Naftogaz, Ukraine's natural gas company, said there was enough gas for the immediate future to heat homes and power its industry.

"Gas is not flowing at all through some transit routes, which can lead to a fall in pressure in all the pipelines and limit the overall supply of gas to Ukraine and Europe," The Associated Press quoted Eduard Zaniuk as saying.

Ukraine announced last week it had signed an extension of its agreement with Turkmenistan, which supplies about half of Ukraine's natural gas supply.

While a gas supply crisis is not expected immediately, experts project that Ukraine will run out of natural gas sometime around the summer.

Western Europe is watching the Ukraine-Russia battle anxiously because the same pipelines that take Russia's gas to Ukraine go on to Western Europe, supplying it with more than a quarter of its natural gas needs.

The fear is that there could be a disruption in European gas supplies because of the dispute.

The European Commission will meet this week to discuss contingency plans. The Russians -- and the Ukrainians -- both promise their dispute won't disrupt western Europe's supply.

So they say now !!!