Russia and Ukraine sign gas deal

By Oleg Shchedrov and Ron Popeski

MOSCOW/KIEV (Reuters) - Russia and Ukraine signed a 10-year gas supply deal on Monday to clear the way for a prompt resumption of supplies to a freezing Europe, cut off for nearly two weeks by a dispute between the ex-Soviet states.

Officials at the signing ceremony in Moscow said gas would start flowing again soon across Ukraine to Europe, but the European Union said it would not consider the crisis over until its monitors register gas arriving at the bloc's borders.

Under the deal, Ukraine will buy Russian gas at a 20 percent discount to European market prices in 2009, while Kiev agreed to retain preferential transit fees for Russia this year before both sides switch to a market-based price formula from 2010.

"Gazprom received an order to start deliveries through all routes indicated by our Ukrainian partners and in full volumes," Russian Prime Minister Vladimir Putin told a joint news conference with his Ukrainian counterpart, Yulia Tymoshenko.

The deal was signed by the chief executive of Russian gas export monopoly Gazprom, Alexei Miller, and the head of Ukrainian state energy firm Naftogaz, Oleh Dubyna.

The exact price was not disclosed, though Russia's Interfax news agency quoted Tymoshenko as saying it will be less than $250 per 1,000 cubic metres -- more than the $179.5 Kiev paid last year but less than Russia's previous demand of $450.

"This agreement is a 10-year deal, as well as a second contract on transit that also assumes the use of a European formula for 10 years," Putin said.

The European Commission, which has expressed frustration that the row was hurting European consumers, said in a statement it needed to know precisely when supplies would resume and that its monitors would verify when gas starts to flow.