Russian Prime Minister Vladimir Putin on Thursday said Ukraine was on the verge of bankruptcy but promised Moscow would not push its ex-Soviet neighbour over the edge with high gas bills, local news agencies reported, according to Reuters.

The global crisis has battered Ukraine's economy, with industrial output down more than 30 percent year-on-year, GDP seen shrinking six percent in 2009 and its currency losing 50 percent of its value against the dollar at one point last year.

"They (Ukraine) are on the verge of bankruptcy and as you well know you should not finish off your partners," Putin said during a visit to a mine in the Siberian town of Novokuznetsk, state news agency RIA Novosti reported.

Relations between Russia and Ukraine have been strained since Western-leaning leaders overcame pro-Moscow rivals in Ukraine's 2004 Orange Revolution.

During his second term as president, Putin developed a personal rivalry with Ukrainian President Viktor Yushchenko who spearheaded efforts to pull Ukraine out of Russia's sphere of influence by joining the NATO military alliance.

But 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.

"Ukraine is not taking the contracted volumes (of gas) and should pay fines. We will forgive these fines because we recognize the reality -- they have nothing to pay with," RIA quoted Putin as saying.


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