MOSCOW, December 30 (RIA Novosti) - Gazprom has set up a special action group to begin preparations to halt gas supplies to Ukraine if the former Soviet state fails to repay its outstanding debt, the Russian energy giant's CEO said on Tuesday.

Gazprom warned earlier that if Ukraine's $2 billion debt was not cleared, no contracts would be signed with Kiev for deliveries after January 1, 2009, leading to cuts in gas supplies to the country.

"Gazprom has today formed an action group, which has started preparations," Alexei Miller told the Vesti TV channel.

Miller reiterated that Ukraine, which has been badly hit by the global economic crisis, should pay the market rate for Russian gas of $418 per 1,000 cu m from January 1, 2009. In 2008, Ukraine paid just $179.5 per 1,000 cubic meters.

"Not much time is left until the end of December 31, but we hope Ukraine will fully repay its debt and sign a new contract," the Gazprom CEO said.

Last ditch talks between Gazprom and Ukraine's national energy company Naftogaz started on Monday in Moscow, but a deal has yet to be reached.

Russian Prime Minister Vladimir Putin said on Monday after talking to Ukrainian President Viktor Yushchenko over the phone, "They do not want to pay."

Russia has warned European leaders that it would cut supplies to the transit country if the arrears were not settled by the end of this year, but guaranteed that any disruption would not affect deliveries to Europe.

The 2006 gas row between the two former Soviet states resulted in a brief cut in supplies to Ukraine. As shortages were reported in Europe, Russia accused Ukraine of siphoning off Europe-bound gas.