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Gazprom and Ukraine reach deal on 2008 gas price

Russia's main energy supplier Gazprom has reached agreement with Ukraine on the price of gas for next year. The deal should avoid the disputes of previous years, when gas supplies to the former Soviet state were cut off.

Ukraine will buy gas at a price of $US 179.5 per thousand cubic metres. That’s a 40 per cent increase on the current price of $US 130.

Kiev will get some compensation by slightly raising the transit tariff for Russian gas.

The deal comes after months of talks and amid fears of a repeat of last year's price dispute between the two sides, which saw Gazprom temporarily cut off supplies to Ukraine.

It also follows a decision by Turkmenistan to raise the price of gas it sells to Russia to $US 130 per thousand cubic metres in the first half of next year. The gas that Ukraine buys from Russia is a mix of Russian and Turkmen gas.
It’s all part of an ongoing move by Russia to increase up the price of gas it sells to former soviet republics to market levels.

Vitaly Yermakov from Cambridge Energy Research Associates thinks there still may be dispute on the issue with Ukraine due to appoint a new Prime Minister soon: “We have to see how this deal is perceived in Kiev and how the Ukrainian President and the new Prime Minister will take the price that the Energy Minister, Boyko, will bring back.”

The expert sees the deal as fair in general, with the rise in price due to Turkmenistan.