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Russia, Ukraine Reach Deal on Natural Gas Prices, EU Welcomes Agreement


Russia and Ukraine have agreed on a new price for natural gas, ending the bitter dispute that affected the flow of gas to western Europe earlier this week. Ukraine will now pay more for Russian gas, but less than Russia had demanded.

Under the new five-year agreement, Ukraine will pay $95 per 1,000 cubic meters of gas.

This is almost double the current price, but far less than what Moscow had wanted. The complex arrangement also appears to give Russia's Gazprom energy company some of what it wanted.

Technically gas will be supplied to a new joint company at $230, Russia's asking price, but Ukraine then has the right to buy gas, for its own needs, at only $95.

The agreement was reached after an all night bargaining session between top officials from both countries in Moscow. Gazprom's chief director Alexei Miller then announced the deal. He says the new deal will help secure full delivery of gas to all European clients, while adhering to market principles.

Insuring full delivery to European countries is critical, following the political fallout caused when supplies were interrupted on Monday. One day earlier, Gazprom cut the flow of gas to Ukraine after Kiev refused to accept the 400 percent price increase.

But the move also cut gas supplies in countries across Europe, causing some leaders to question Russia' reliability as a supplier of energy. Europe imports about one-quarter of its natural gas from Russia, and the crisis has highlighted the continent's dependence on Moscow for much of its energy.

The agreement was reached just hours before European Union officials in Brussels convened a special meeting to discuss energy security. EU Energy Commissioner Andris Piebalgs welcomed the agreement, but warned the European Union must learn the lessons of the dispute by cutting energy use and finding alternative sources of supply

Critics say Moscow's original strategy was political, as the demand for Ukraine to pay the much higher price came one year after the election of pro-Western President Viktor Yushchenko in Ukraine.

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