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Last Updated: Tuesday, 17 January 2006, 16:43 GMT
Moldova agrees Russian gas deal
Gaspipe valves
Turning off the gas supply gives Russia negotiating leverage
Moldova has reached an agreement over gas prices with Russia, ending a spat that led to supplies being cut off.

The deal will last four months and will see Moldova pay $110 (62) per 1,000 cubic metres of natural gas, compared with the previous price of $80.

Russia is renegotiating gas deals with a number of ex-Soviet Union nations, a move that has raised regional tensions.

On 1 January it cut supplies to Ukraine, raising the spectre of surging gas prices across Europe.

Changing times

Russian gas giant Gazprom is negotiating the deals and had cut off supplies to Moldova after its initial offer of $160 per 1,000 cubic metres was rejected.

In previous years, state-owned Gazprom has sold gas at less than market prices to nations that were once Soviet Union members.

However, Gazprom now argues that the favourable deals should come to an end and market prices should apply - although critics say that those nations retaining close ties with Moscow are offered more favourable terms.

The spat with Ukraine was short-lived but closely watched because a significant amount of Europe's natural gas is transported across Ukraine and any disruption to supplies could have a major impact.

Ukraine now pays $95 per 1,000 cubic metres of gas, double its previous price.

Talks continue

Despite having to pay a higher price, Moldova's President Vladimir Voronin called the deal with Russia a "triumph for pragmatism".

The country's Economics and Trade Minister Valeriu Lazar told local press that the new price would not have serious impact on Moldova's economy.

Russia and Moldova will continue talks to strike a longer-term deal.

The European Union said on Tuesday it would send a delegation to evaluate the situation, but said it did not expect to play a part in the negotiations.

Gazprom, meanwhile, has been increasing its presence in the region's gas industry and said it would take a 50% stake in RosUkrEnergo, a company with a near-monopoly over Ukraine's gas imports.

At the same time, the Moldovan government has signalled its willingness to cut its holding in Moldovagaz, a joint venture with Gazprom.

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