Reuters cited Vladimir Russian Prime Minister as saying that Ukraine was on the verge of bankruptcy but promised Moscow would not push its ex Soviet neighbor over the edge with high gas bills.

Mr Putin said during a visit to a mine in the Siberian town of Novokuznetsk that "They are on the verge of bankruptcy and as you well know you should not finish off your partners."

During his second term as president, Mr Putin developed a personal rivalry with Ukrainian President Mr Viktor Yushchenko who spearheaded efforts to pull Ukraine out of Russia's sphere of influence by joining the NATO military alliance. But Mr Putin said Russia would refrain from levying fines on Ukraine for violating the terms of gas supply contracts that could contribute to a financial collapse in Ukraine.

Mr Putin said "Ukraine is not taking the contracted volumes and should pay fines. We will forgive these fines because we recognize the reality they have nothing to pay with."

Russia has also been hit hard by the crisis but Mr Putin said its large financial reserves put it in a stronger position. He forecast the state would this year be able to spend 12% of GDP to ease the effects of the crisis. He added tat "Our anti-crisis package is bigger than in other countries."

Ukraine has appealed to the International Monetary Fund to make up for a budget shortfall caused in part by a collapse in prices for steel, a key export.

(Sourced from Reuters)