Naftogaz, Gazprom relationship detailed

MOSCOW, Nov. 25 (UPI) -- Ukrainian utility Naftogaz and Russian gas giant Gazprom agreed to lower gas shipments and prices under the terms of an amended January agreement.

Ukrainian Prime Minister Yulia Tymoshenko welcomed her Russian counterpart, Vladimir Putin, to Yalta to discuss the terms of a bitter energy relationship last week.

Oleg Dubina, the chief executive of Naftogaz, and Gazprom chief Alexei Miller agreed on an amended contract to cut the pricing formula outlined in a January deal by 20 percent. Gas deliveries would also drop from 1.8 trillion cubic feet to 1.2 trillion cubic feet of gas for 2010, Russia's ITAR-Tass news agency reports.

The energy executives agreed to review the pricing terms each fiscal quarter and make appropriate adjustments based on market conditions.

Furthermore, Moscow agreed to waive any fines that Ukraine may incur from lower gas purchases as Kiev struggles with a lingering economic recession.

Gazprom cut gas supplies briefly to Ukraine in January following a dispute over gas contracts and debt. The contract settling that dispute placed strict conditions on Kiev in terms of gas payments and volumes.

The acrimony from the energy relationship between Kiev and Moscow has spilled over to the European energy sector as 80 percent of all Russian gas bound for its European customers travels through Soviet-era pipelines in Ukraine.