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Ukraine, Russia Resolve Gas Dispute

Europe heaved a sigh of relief on March 5 as Ukraine and Russia clinched a deal to resolve a bitter dispute threatening to disrupt natural-gas supplies to European markets.

Gazprom, Russia's state-controlled gas monopoly and the power base of President-elect Dmitry Medvedev, announced the agreement in a joint statement with Ukraine's state energy company, Naftohaz.

The deal followed telephone negotiations involving Russian President Vladimir Putin and his Ukrainian counterpart Viktor Yushchenko.

"The parties have agreed that gas delivered [to Ukraine] from January 1 to March 1, 2008, will be fully documented and paid for by Naftohaz Ukrayiny according to the scheme that existed at the beginning of the year," Gazprom spokesman Sergei Kupriyanov said at a news conference in Moscow.

"Gas transit via Ukraine to European consumers is being carried out in full," he added. "The restrictions on gas deliveries to consumers in Ukraine have been lifted."

After halving gas shipments to its ex-Soviet neighbor earlier this week, the Russian gas giant had threatened new cuts if Ukraine didn't settle what Gazprom says is $600 million debt in unpaid bills for gas delivered in 2007.

Ukrainian Prime Minister Yulia Tymoshenko had sounded a defiant note, branding the cuts "provocations" and vowing to keep her country supplied with natural gas, heat, and hot water.

The dispute echoes a 2006 gas pricing row that culminated with Gazprom briefly halting gas deliveries to Ukraine. The move triggered energy shortages in parts of Western Europe that depend on Russian gas that transits Ukraine.

This time, the European Union reacted swiftly with a statement urging both parties to "ensure that gas supplies to the European Union remain unaffected."

Ukraine's Naftohaz sought to play down the dispute, pledging that differences would be resolved "very soon."

Gazprom's Kupriyanov, however, claimed on March 5 that Ukraine had warned that it is diverting some 17 percent of the transit gas earmarked for Europe, 60 million cubic meters, to compensate for the reduced supplies.