Austria's energy regulator will propose to the European Commission the establishment of a European Union-controlled gas transit operator in Ukraine to increase security of Russian gas supplies to Western Europe, its chief executive said Tuesday.

Austria's energy regulator will propose to the European Commission the establishment of a European Union-controlled gas transit operator in Ukraine to increase security of Russian gas supplies to Western Europe, its chief executive said Tuesday.

"I have written a draft, which will be sent to the European Commission, outlining a proposal for a rearrangement of gas transit through Ukraine," E-Control Chief Executive Walter Boltz told Dow Jones Newswires in an interview.

The proposal is a reaction to the gas dispute between Russia and Ukraine, which has caused a 90% reduction in the gas flow to the Austria-based Central European Gas Hub, which serves as a distribution link to a number of European countries.

"Now, gas imported from Russia to Western Europe through Ukraine changes ownership at the Austrian border. With my proposal, the ownership would change at the Russian-Ukrainian border," Boltz said.

This would make future disputes over transit of gas through Ukraine an E.U.-Ukrainian issue, rather than a Ukrainian-Russian issue, thereby removing political tension between the two countries from the equation, Boltz said.

The Austrian proposal envisions not only a strong E.U. hand in the transit operator, but also the involvement of the International Monetary Fund and the World Bank, Boltz said.