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Europe

Gas Rivals Putin and Yushchenko Meet and Make up

The Russian and Ukrainian presidents met after resolving a bitter dispute over gas prices but while both hailed the agreement as fair, the fallout of that fight still lingers for Ukraine.

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The two leaders met and shook hands

Russian President Vladimir Putin and his Ukrainian counterpart Viktor Yushchenko on Wednesday hailed the agreement between their countries to resolve a bitter natural gas price dispute as a fair deal.

Putin told reporters in the Kazakh capital, Astana, that the two countries had trodden "a difficult path" but had "found a just and fair resolution to the gas question" after meeting Yushchenko for the first time since the crisis.

Yushchenko agreed, saying: "We succeeded in finding an agreement that is good for everyone. Ukraine will respect agreements made with Russia and Europe to the letter."

The two leaders were in Kazakhstan for the inauguration of veteran Kazakh President Nursultan Nazarbayev.

The chairman of Russian energy giant Gazprom, Aleksei Miller, and Russian Energy Minister Viktor Khristenko, as well as Ukrainian Energy Minister Ivan Plachkov and the head of Ukraine's state-owned energy company Naftogaz, Oleksiy Ivchenko, also attended the ceremony.

A face-saving agreement

The crisis came to a head on New Year's day when Russia briefly shut off gas supplies after Ukraine refused a four-fold price increase, causing disruption in gas deliveries to other countries in Europe further downstream. Europe receives nearly one-fifth of its annual gas imports from Russia via Ukraine.

The two sides signed a face-saving agreement on January 4 which resulted in a near doubling of gas prices for Ukraine.

Ukraine Russland Streit um Gas Gasanlage bei Kiew

The face-saving deals doubles the price of gas for Ukraine

Under the accord, Ukraine agreed to buy natural gas from Russia and Turkmenistan, which accounts for nearly 75 percent of its annual energy needs, at a price of $95 (79 euros) per 1,000 cubic meters. Previously it bought Russian gas under a barter system for 50 dollars per 1,000 cubic meters, and Turkmen gas for between $44 and $60 per 1,000 cubic meters.

The price reached under the accord was well below the 230 dollars per 1,000 cubic meters that Russia had been demanding. But the complex accord sets the price of 95 dollars only for the first six months of 2006, with the later price to be set by an as yet undetermined formula.

Repercussions for Ukraine

The agreement was sharply criticized by various political groups in Kiev and on Tuesday the parliament voted to sack the government over the accord.

Yushchenko warned Wednesday that the sacking of his pro-Western government by lawmakers over a controversial gas deal with Russia would destabilize the country less than three months before a key parliamentary election.

Juri Jechanurow

The deal had repercussions for the Ukrainian prime minister

"This decision is incomprehensible and illegitimate," Yushchenko told reporters in Kazakhstan. "This decision means only one thing: the destabilization of the situation (in Ukraine).

On Tuesday, lawmakers passed a resolution of no-confidence in Prime Minister Yury Yekhanurov's government, chiefly motivated by the deal.

Most analysts and many politicians in Kiev said the gas deal was only an excuse for the opposition to strike a blow against pro-Yushchenko forces ahead of a March 26 parliamentary election, which will decide the future of the pro-Western course that the president has set for ex-Soviet Ukraine.

Olexander Dergachyov, the editor of a political magazine in Kiev, said that "any deal would have made the government the object of attacks."

The resolution to sack the government was supported by an eclectic coalition that included the main parties who opposed Yushchenko during last year's "orange revolution."

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