Russia and Ukraine negotiate solution to gas dispute that worried EU consumers

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Associated Press Writer

MOSCOW (AP) -- Russian and Ukrainian leaders on Tuesday agreed to settle a dispute over Ukraine's gas debt, avoiding a threatened cutoff in supplies that had rattled consumers in the European Union.

Russia's President Vladimir Putin and his Ukrainian counterpart, Viktor Yushchenko, said they negotiated a settlement of Ukraine's debt and agreed on terms for gas supplies later this year.

"We have agreed that Ukraine will start paying off the debt starting Thursday," Yushchenko said at a news conference after the Kremlin talks, which lasted for four hours.

Russia's state-controlled natural gas monopoly, Gazprom, said Ukraine owes $1.5 billion for gas. Ukrainian Prime Minister Yulia Tymoshenko acknowledged Monday that Ukraine had a gas debt, but gave the lower figure of $1.07 billion.

Yushchenko said the two sides also agreed that Ukraine would pay the current price of $179 per 1,000 cubic meters through the year's end.

Putin said Gazprom was satisfied with the Ukrainian proposals on settling the gas debt. Formal agreements will be signed within the next few days, he said.

"We hope that all agreements will be fulfilled," he said.

OAO Gazprom had threatened to cut off gas supplies to Ukraine starting at 6 p.m. Tuesday if an agreement was not reached. The prospect worried European Union nations, which experienced disruptions in gas supplies transiting Ukraine during a similar cutoff in January 2006.

Tymoshenko pointed out that Ukraine owes the debt to RosUkrEnergo, a middleman company half-owned by Gazprom, from which Ukraine buys all its imported gas. She has pledged to get rid of the middleman, which she says fosters corruption.

Yushchenko said after the talks that the two countries agreed to set up a working group to discuss ways to streamline their gas trade.

Oleh Dubina, the head of Ukraine's natural gas company Naftogaz, told reporters that Gazprom will directly supply gas to Naftogaz.

Ukraine mostly buys Central Asian gas, which it gets through Gazprom-controlled pipelines crossing Russia. However, it was forced to buy additional Russian gas in recent months because an unusually cold winter in Central Asia reduced supplies.