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Russia To Let Ukraine Slash Gas Purchases

Russian Prime Minister Vladimir Putin meets with his Ukrainian counterpart, Yulia Tymoshenko, in Gdansk on September 1.
SOPOT, Poland (Reuters) -- Russian Prime Minister Vladimir Putin has agreed to let Kyiv import much less gas than previously arranged, saving Ukraine's economy from potentially huge fines before an election early next year.

The deal, struck at talks with Ukrainian Prime Minister Yulia Tymoshenko, allows Ukraine to slash the volumes it had originally agreed to take after a row with Moscow that led to the worst disruption of European Union supplies in decades.

"We feel that all the crisis-inducing occurrences in this sphere have gone," Tymoshenko said after talks with Putin in the Polish seaside resort of Sopot.

"We have together with Vladimir Vladimirovich [Putin] discussed again the size of Ukrainian demand for Russian gas and the position of the Russian prime minister is very important -- Ukraine will pay for the gas that it needs," she said.

Russia's Gazprom, the world's biggest natural gas company, supplies a quarter of the European Union's gas and most of this goes through pipelines across Ukraine.

Putin said the two prime ministers had "agreed that the current global financial crisis...must be taken into account in our bills and supplies."

"We'll give the order to the companies to respect the circumstances. We understand that the Ukrainian economy uses only that which it needs today," he said.

Diplomats say they are closely watching the relationship between former Kremlin chief Putin and Tymoshenko, the most popular Ukrainian politician now holding office, ahead of Ukraine's January 17 presidential election.

Moscow is eager to extend Russian business interests in Ukraine.

Ukraine, Gazprom's largest consumer, promised after the gas row in January to buy 40 billion cubic meters (bcm) this year and over 50 bcm next year, according to Ukrainian officials.

But officials say the deep economic recession means Ukraine needs only 32-33 bcm of gas this year and 25-27 bcm next year -- half the contracted amount.

"Our meeting was very important for Ukraine," Tymoshenko said with a smile. "Our next meeting will take place in October and we plan it in Ukraine. I invite you and your team."

Tymoshenko's warmer ties with Russia over recent months have prompted speculation that Moscow may be backing her in the election to gain influence over the former Soviet republic.

"We always have something to speak about," said Putin. "Traditionally, attention is focused on energy but besides this, there are other areas of our cooperation."

Putin spokesman Dmitry Peskov said after the talks that the election in Ukraine had not been discussed at the meeting.