Russia makes deal with Ukraine on price of gas supplies

Russia's gas monopoly has reached a preliminary agreement on the price of gas supplies to Ukraine, while Ukraine has settled its debt for previous shipments.

Photo: Russia makes deal with Ukraine on price of gas supplies

But a company spokesman said the agreement was not final. "There is no agreement on price yet; the talks are continuing," Sergei Kupriyanov told The Associated Press.

The negotiations were part of what Russia describes as an effort to end its practice of providing energy supplies to former Soviet republics at a fraction of global prices. That effort escalated in early 2006 into a dispute, however, that led Russia to cut supplies to Ukraine, affecting some European countries further along the export pipeline.

Russia has since sought to assure a worried European Union that export supplies would not be affected, amid Western concerns that Russia was using the issue of energy supply as a political weapon.

Gazpom's deputy chairman Alexander Medvedev said Friday that the gas monopoly and Ukrainian officials had reached a preliminary agreement on a price of US$160 (109 EUR) per 1,000 cubic meters for gas supplies to Ukraine next year - a steep increase over the current price of US$130 (89 EUR) per 1,000 cubic meters

"The most important thing is that this price is acceptable for Ukraine," Medvedev said in the interview with Russia Today television. "So we believe that it's a reasonable price for the next year and we could work in this framework."

Last month, Russia urged Ukraine to make good on what it said was a US$1.3 billion (890 million EUR) debt for gas shipments, a demand some Ukrainian officials described as an attempt to exert influence on Ukrainian politics following September's parliamentary elections.

Medvedev said Friday that the dispute over debt was over.

"The debt issue is settled, and we are at an advanced stage of negotiations on the future price mechanism for Ukraine," he said.

Medvedev said Gazprom was negotiating a gradual rise in gas prices for Ukraine to a world level.

"It won't be just a one-year agreement but a middle-term solution," Medvedev said. "It coincides with the trend in Russia. In 2011, we'll have the market price for the local market also."