Russia and Ukraine ended a bitter, months-long dispute over gas supply on Wednesday with a five-year deal hailed in both countries but seen as a bittersweet outcome in Europe after a shudder from supply shortfalls.

Russia's gas giant Gazprom and Ukraine's oil and gas company Naftogaz Ukrainy clinched a deal on Wednesday, under which Gazprom will sell gas for US$230 per 1,000 cubic meters to the Rosukrenergo trading company, which will mix the Russian gas with cheaper gas from Central Asia and sell the blend to Ukraine for US$95 1,000 cubic meters.

Ukraine had been buying Russian gas at US$50 per 1,000 cubic meters over the past year.

The two sides also agreed on a new price for transit of gas through Ukraine to Europe of US$1.60 for every 1,000 cubic meters transported 100 km, up by nearly 50 percent from the previous price of US$1.09.

Hours after the announcement of the deal, Russian President Vladimir Putin hailed the accord, saying it will have a positive impact on bilateral relations and "create stable conditions for supply of Russia fuel to western European partners for many years to come."

Putin's Ukrainian counterpart, Viktor Yushchenko, who had been resisting strongly the Russian demand to more than quadruple the price of gas for Ukraine, also welcomed the agreements.

"The Ukrainian economy is well prepared to operate in new market conditions," Yushchenko's press service quoted him as saying.

"Ukraine is a reliable and stable partner both for the European Union (EU) and the Russian Federation," he said.

Gazprom provides about half the gas consumed in the EU and 80 percent of that amount is sent through pipelines crossing Ukraine.

"The agreements will provide additional security guarantees to gas exports to Europe and serve as a sound foundation for further cooperation between Russia and Ukraine in the gas sector based on market principles," Gazprom chairman Alexei Miller told a press conference in Moscow.??
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Europe's nerve touched

Russia cut off supply to Ukraine at the height of the bruising dispute. European countries from Slovenia to Germany felt the pinch of Russia's move as gas supplies fed by a key pipeline through Ukraine dipped severely during what has been one of the coldest weeks of the winter.

Supplies in many affected countries were restored after Gazprom pumped extra gas into pipelines running through Ukraine.

While Russia is struggling to portray itself as a reliable gas supplier to European countries after its move caused an uproar in Europe, EU officials said the 25-nation bloc must learn lessons.

After an emergency session on Wednesday in Brussels to discuss energy security, EU officials said Russian gas remains the backbone of the EU's energy supply but the 25-nation bloc should learn the lesson of the gas dispute and examine other types of energy.

While the EU's dependence on Russia's energy might not change for years, the EU should focus more on energy efficiency, renewable energy and nuclear energy, said Martin Bartenstein, economic minister of current EU president country Austria.

Wednesday's meeting which was originally planned to explore a way out of the gas dispute but turned into a celebration gather-in gas Russia and Ukraine cut a deal before EU officials convened.

(Xinhua News Agency January 5, 2006)