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Russia, Ukraine deal averts gas crisis

  • Story Highlights
  • Russia and Ukraine agree in principle price on natural gas for 2008
  • Announcement made at joint news conference of the two presidents
  • State energy giant Gazprom had threatened to stop supplying gas to Ukraine
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MOSCOW, Russia (CNN) -- Averting what could have been another gas crisis across Europe, Russia and Ukraine have fixed a price on natural gas for 2008 while Kiev has promised to pay its 2007 gas debts.

The last-minute deal mirrored a similar situation in 2006, when Russia briefly cut off gas supplies to Ukraine over pricing differences. Ukraine is the largest facilitator of natural gas to European Union countries, and the disruption caused shortages in Western Europe.

Russian President Vladimir Putin and Ukraine President Viktor Yushchenko announced on Tuesday they had reached agreement on the gas issue at a news conference in Moscow following their talks.

The Russian natural gas company, Gazprom, had threatened to stop supplying gas to Ukraine on Monday, then extended the deadline until Tuesday evening while talks continued.

The two leaders said several other issues between the countries had been resolved, as well.

Yushchenko said Ukraine will pay its gas arrears of 2007 and will be a stable transit supplier to Western Europe.

A final agreement will be signed in the next few days and payment for gas already used will begin shortly, Putin said.

After the gas cut-off in 2006, EU leaders called for solutions that would allow the union to avoid being a victim of disputes between Russia and other former Soviet republics.

A consortium of countries banded together to fund the Nabucco pipeline, a $7.4 billion (5 billion euros) project that will bring gas from Turkey's borders with Georgia and Iran to Turkey, Bulgaria, Romania, Hungary and Austria, and then on to Central and Western Europe, according to the Nabucco Web site.

Construction is to begin in 2009 on the 3,400-km (2,113-mile) pipeline, and it's expected to be operational in 2013.


But Gazprom, along with Italy's ENI, is planning a 900-km (560-mile) pipeline following a similar route to feed into Austria and Italy, a project that would cost between $14.6 billion and $17.5 billion (10 billion to 12 billion euros).

Last week, the managing director of Nabucco Gas Pipeline International, Reinhard Mitschek, announced that Gazprom may also send gas through the Nabucco pipeline. Critics say the move would undermine the purpose of the project, which was to reduce European dependence on Russian gas. E-mail to a friend E-mail to a friend

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