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Ukraine russia reach gas deal

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Ukraine, Russia reach gas deal
Last Updated Wed, 04 Jan 2006 14:27:32 EST
CBC News
Ukraine has agreed to pay nearly twice last year's cost for natural gas from Russia, ending a bitter dispute that threatened supplies to Europe.

A private company will buy the gas Ukraine needs for $230 US per 1,000 cubic metres of natural gas, the price Russia's state monopoly Gazprom was demanding.

But customers in Ukraine will pay $95 US per 1,000 cubic metres. The private company will make up the difference by blending gas it gets at a cheaper price.

The agreement is being heralded as a victory for both sides.

Russia cut off supplies for two days when Ukraine refused to pay the $230 US asking price.

Russia accused Ukraine of illegally siphoning off gas bound for Europe, and argued Ukraine had been getting cheap supplies for years and should be paying market value.

The cutoff to Ukraine resulted in a sharp two-day drop in gas deliveries to Europe. Gazprom supplies one-quarter of Europe's gas needs, and about 80 per cent of that is delivered via a pipeline that goes through Ukrainian territory.

The EU welcomed the five-year pact but leaders were concerned that Russia was using gas as a geopolitical weapon to punish Ukraine's pro-Western president, Viktor Yushchenko, who was swept to power in the Orange Revolution of 2004.

Moscow's hardball tactics reflected a new assertiveness on the part of President Vladimir Putin.

Officials from the EU's 25 member states met in Brussels to discuss the gas crisis and how to deal with potential future supply threats. Neither Russia or Ukraine attended.

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