"If our partners do not fulfill agreements, we will have to reduce supplies. What else can we do?" Putin said in a live televised question-and-answer session, adding that Moscow would notify European consumers of any such decisions.
Russian energy giant Gazprom last month quoted Ukraine's outstanding debt at $2.4 billion. Some of the funds have reportedly been repaid, but Gazprom has demanded full payment, and threatened supply cuts.
Ukraine transits about 80% of Russia's Europe-bound gas.
The countries have also agreed on a gradual shift to market gas prices. Ukraine currently pays $179.5 per 1,000 cubic meters for gas imported from Russia or via Russian territory.
Gas supplies have been a thorny issue in recent years, triggering bitter rows between the two former Soviet republics. A pricing row between the countries at the start of 2006 led to a brief cut in supplies to Ukraine. Some consumers in Europe reported supply shortfalls during the dispute.