The European Union proposed a price cap on Russian gas on Wednesday after President Vladimir Putin threatened to cut off all energy supplies if it took such a step, raising the risk of rationing in some of the world's richest countries this winter.

The escalating standoff could drive up sky-high European gas prices further, adding to already eyewatering bills EU governments are paying to stop their energy providers collapsing and prevent cash-strapped customers freezing in the cold months ahead.

Europe has accused Russia of weaponising energy supplies in retaliation for Western sanctions imposed on Moscow over its military campaign in Ukraine. Russia blames those sanctions for causing the gas supply problems, which it puts down to pipeline faults.

As tensions rose, Putin said contracts could be ripped up in the event of price caps and warned the West it risked being frozen like a wolf's tail in a famous Russian fairy tale.

The EU however plans to press ahead with a price cap on Russian gas and also a ceiling on the price paid for electricity from generators that do not run on gas. 

EU energy ministers are due to hold an emergency meeting on Friday.

(With input from Reuters)