Russia and Ukraine agree to restore gas supplies

By Ron Popeski and Vladimir Soldatkin

MOSCOW/KIEV (Reuters) - Ukraine and Russia reached agreement to restore gas supplies to Ukraine, averting the risk of cuts in deliveries to western Europe, Russian gas giant Gazprom and Ukraine's state company Naftogaz said on Wednesday.

But the two sides still have to work out the difficult details of a scheme of how supplies are to be organised for the rest of the year, particularly the use of intermediaries.

"Transit of Russian gas through Ukrainian territory is proceeding in full," said a joint statement, read out in Kiev by Naftogaz spokesman Valentyn Zemlyansky. "All restrictions for use by Ukrainian consumers have been lifted."

Russia had cut gas supplies to Ukraine in half on Tuesday over a protracted payment dispute, sparking concern in Brussels and Washington about the security of energy supplies. A quarter of Europe's gas comes from Russia, most of it through Ukraine.

The joint statement said the deal was clinched in talks conducted by telephone by the heads of Naftogaz and Gazprom -- Oleh Dubyna and Alexei Miller -- after the presidents of the two ex-Soviet states had spoken on Tuesday.

It said Naftogaz would make payment "as quickly as possible" for about 6 billion cubic metres of gas consumed in the first two months of the year worth about $1 billion.

Ukraine denied throughout the dispute that it had siphoned off any Europe-bound supplies to meet its own needs, as Moscow alleged, saying it maintained all its commitments to the West.

The two sides agreed that supplies provided until March 1 would be considered "according to the existing scheme." That referred to a deal clinched after a 2006 pricing dispute under which gas from Russia is sent to Ukraine and distributed to consumers by joint venture companies serving as intermediaries.