Russia-Ukraine deal ends dispute on gas — for now

MOSCOW — Russia and Ukraine reached agreement Wednesday on restoring natural gas supplies to Ukraine, ending — for now, at least — a dispute that ripped an even larger chasm between the two former Soviet republics, rattled European consumers of Russian gas and called into question Moscow's reputation as a reliable energy provider to the West.

Almost a week after negotiations collapsed amid accusations of blackmail, sabotage and thievery, both Moscow and Kiev claimed victory in the complicated, five-year deal that involves a complex pricing plan, gas from Central Asia and a Russian-Swiss trading business that had been under investigation in Ukraine.

"Two nations won — Russia and Ukraine; Europe won; it is common sense that won," Ukrainian Prime Minister Yuriy Yekhanurov told reporters in Kiev.

Russian President Vladimir Putin said the deal would reflect positively on the whole range of relations between Moscow and Kiev, saying it would create "stable conditions for deliveries of Russian energy carriers to our Western European partners many years into the future."

Europe gets about a quarter of its gas from Russia, some 80 percent of that arriving in pipelines that cross Ukraine. While Ukraine buys a third of its gas from Russia, Moscow is also its key supplier.

Analysts had mixed reactions to the deal, which has Ukraine buying gas from the RosUkrEnergo trading company for almost twice what it had been paying but still lower than the fourfold increase Russia originally sought.

The deal is "a very powerful blow which threatens Ukraine with catastrophe," said Mykhaylo Pohrebinsky, a Kiev-based analyst.

Chris Weafer, chief strategist with Alfa Bank in Moscow, called it a "face-saving compromise" for both countries, but he blamed Russia's state-controlled gas monopoly, OAO Gazprom, for the impasse.

"What started out as a commercial dispute turned into a political dispute, because it was badly handled," he said.

The heads of Gazprom and the Ukrainian state-controlled company Naftogaz announced the deal in Moscow on Wednesday, three days after Russia stopped gas deliveries to Ukraine and two days after European customers reported a sharp drop-off in their own gas supplies, which cross Ukraine.

Under the complex deal, Gazprom will sell gas to RosUkrEnergo for the same price it had demanded Ukraine pay beginning Jan. 1 — $230 per 1,000 cubic meters. Ukraine will then buy gas from the company for $95 — nearly twice what it had previously been paying Gazprom.