Ukraine government reaches agreement on gas prices with Russia's TNK-BP

Ukrainian Prime Minister Yulia Tymoshenko said Thursday that Russia's TNK-BP had agreed to lower the price of gasoline at its stations throughout Ukraine to the level of government-set price caps.

The agreement came amid growing accusations by Ukrainian officials against TNK-BP and another big Russian oil company, Lukoil, of conspiring to raise the price of gasoline.

Ukraine's Anti-Monopoly Committee opened a criminal investigation into the two oil giants, as well as other companies, into alleged price-fixing.

"We agreed that tomorrow from 8 a.m. the chain of TNK gas stations, which number 1,000, will use the prices set out in the Ministry of Economy's order," Tymoshenko said in a statement distributed by her office.

TNK-BP's Ukraine office said no one was immediately available to comment. The Moscow-based oil company is half-owned by Britain's BP oil major.

Prices at the gas pump have risen 13 percent this month, a sharp increase that underscored Ukraine's energy dependence on Russia and threatened to fuel popular discontent against the new government.

Under the agreement, the gasoline price will fall back to 2.99 hryvna (59 U.S. cents, 45 euro cents) a liter from the current 3.30 hryvna (65 U.S. cents; 50 euro cents).

Oil traders have said the increase is due to Russia's boosting of export tariffs, rising costs for rail shipments in Ukraine and high world prices.

Tymoshenko was scheduled to meet with representatives of Lukoil's Ukraine office on Friday, and she predicted an equally positive result.

"I think that within a week, the government will manage to bring the price of gasoline to a normal level," Tymoshenko said.

Russian companies dominate Ukraine's gasoline sector, controlling 87 percent of the market. After the 1991 Soviet collapse, Ukraine didn't have enough oil reserves to run its Soviet-era refineries, and so the newly independent nation turned to Russian investors.

Ukrnafta is the only major homegrown player in Ukraine, and the company is trying to develop its own retail network.

Tymoshenko said Wednesday that Russian companies' dominance of the Ukrainian market was no longer welcome - a comment that comes amid the ongoing chill in relations. If the Russian companies had been found guilty of price fixing, they faced fines of 10 percent of their 2004 profits.

MARA D. BELLABY, Associated Press Writer

On the photo: Yulia Tymoshenko

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