Russia, Ukraine Agree on Gas Plan

Russia and Ukraine reached a deal Wednesday to resume gas shipments to Ukraine under a complex price scheme, ending a standoff that raised fears of long-term shortages in Europe.

The agreement was announced in Moscow by the heads of OAO Gazprom and Naftogaz, the two countries' state-run natural gas companies.

Russia stopped selling natural gas to the Ukraine on Sunday after its neighbor balked at a fourfold price increase. European customers reported a sharp falloff of gas supplies on Monday.

Europe gets about a quarter of its gas from Russia, much of it by way of pipelines that cross Ukraine. Moscow accused Ukraine of siphoning off Europe-bound gas, a charge Ukraine denied.

Under the agreement, Russia's Gazprom will sell gas to a trading company for $230 per 1,000 cubic meters and Ukraine will buy gas from the company for $95. The trading company, Rosukrenergo, can charge Ukraine lower prices because it receives cheaper gas from Turkmenistan.

"We are fully satisfied with the agreement," Gazprom chief Alexei Miller said.

Gazprom spokesman Sergei Kupriyanov said the agreed price was $230 as of Jan. 1 but that it would fluctuate with the market. He did not indicate how often the price would be adjusted.

Naftogaz chief Oleksiy Ivchenko said that the two companies had also agreed to a 47 percent increase in the transit fee Gazprom pays to send its gas through Ukrainian pipelines.

Russia last year supplied about a third of the gas consumed in Ukraine, a country of 48 million.

Gazprom initially demanded that Ukraine pay $230 per 1,000 cubic meters, four times what Ukraine was paying for Russian gas in 2005.

Many observers saw Russia's gas price demands as part of a strategy to punish Ukraine for turning toward the West politically in the past year. Historically Russia has dominated Ukraine.

After a wave of criticism from Europe, Russia boosted the amount going into Ukrainian pipelines late Monday and supplies in Europe appeared to be returning to normal on Tuesday.

Both sides appealed for help from the European Union — of which neither country is a member.

Russian Prime Minister Mikhail Fradkov called on EU member nations to put pressure on Ukraine to ensure that natural gas transiting the country reaches Europe.

Ukrainian President Viktor Yushchenko asked the EU to mediate, saying "it is impossible not to see a scenario aimed at energy pressure and blackmail," according to a statement from the Ukrainian Foreign Ministry.

Representatives of European Union member states and the gas industry were meeting Wednesday in Brussels to discuss how to respond and how to deal with future threats to Europe's gas supply.

Although European countries including Austria, Slovakia and Hungary reported their gas supplies had returned to normal Tuesday, the gas fight has reawakened European fears over Russia's reliability and potential for belligerence — criticism that comes as the country assumes the chairmanship of the Group of Eight, a position it wants to use to boost its international prestige.

U.S. State Department spokesman Sean McCormack on Tuesday decried "the use of energy for political purposes."

Rosukrenergo is jointly owned by Gazprom bank and a Swiss subsidiary of Austria's Raiffaisen Bank.