Russian gas giant Gazprom agreed at talks with Ukrainian officials yesterday to continue supplying gas to Kiev at existing rates for the first quarter of 2006

Russian gas giant Gazprom agreed at talks with Ukrainian officials yesterday to continue supplying gas to Kiev at existing rates for the first quarter of 2006, a spokesman for Naftogaz Ukraine said.

Gazprom spokesman Sergei Kupriyanov said he could not immediately comment on the news. Naftogaz spokesman Eduard Zanyuk said, ‘Yesterday at the end of talks … the following accord was reached: in the first quarter of next year supplies will be provided at the same price and volume as exist in the current contract.’

He did not say what prices might apply after the first quarter or if any agreement had been reached.

Gazprom wanted Ukraine, led by pro-Western President Viktor Yushchenko since last year’s ‘Orange Revolution’, to agree to steep increases in prices for its gas – to $230 per 1,000 cubic metres from the current $ 50.

Ukraine has described the increase as unfair and sought a transition period.

Zanyuk made no mention of other conditions, including Russian President Vladimir Putin’s demand, issued earlier in the day, that Ukraine to sign a contract agreeing to market prices from the second quarter.

Asked when there would be new talks, he said: ‘The experts are still working.’

Zanyuk hoped supplies would continue uninterrupted today, when Russia has been threatening to cut off Ukraine’s gas supply at 0700 GMT if no deal was reached.

‘I hope that everything will be all right tomorrow,’ he said.

Russian President Vladimir Putin offered yesterday to delay the price rise.

Putin said Ukraine could receive Russian gas at existing lower prices until April and then switch to the fourfold increase being demanded by state-controlled gas giant Gazprom.

‘I instruct the government and Gazprom to ensure gas deliveries in the first quarter of 2006 with the conditions and rates of 2005, on the condition that before the end of this year the Ukrainian partners sign the contract with Gazprom’s offer for switching to market prices in the second quarter,’ Putin said.

The row has sparked concern in western Europe, which is heavily dependent on Russian energy supplies, and cast a shadow over the start to Russia’s 2006 presidency of the Group of Eight (G8) industrialised nations’ club, during which Moscow wants to present itself as a reliable energy partner.

Andrei Illarionov, Putin’s longtime economic adviser, who resigned this week to protest what he said was the lack of freedom in Russia, accused Moscow of using energy as a ‘weapon’.

Gazprom wants Ukraine to pay $ 230 (195 euros) per 1,000 cubic metres (35,335 cubic feet) of gas from the start of 2006, up from the current $ 50. The company says this price reflects standard world rates.

Ukraine says it is ready to pay more but not so quickly and is offering up to $ 80 in a preliminary transition period. Moscow has flatly dismissed the offer.

Officials in Kiev say industrial centres will see a drop in supplies, but ordinary people should notice no difference, as the country has enough gas reserves to last the bitterly cold winter.

‘The people will feel nothing,’ Prime Minister Yuriy Yekhanurov promised, although many ordinary Ukrainians have expressed alarm.

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