Ukraine and Russia will switch to a new pricing scheme for Russian gas based on European market prices in the next three years, Ukraine's prime minister said on Thursday.

"In the next three years we will move over to usual market prices," Yulia Tymoshenko told her Russian counterpart Vladimir Putin during talks at his residence of Novo-Ogaryovo outside Moscow.

Ukraine currently pays $179.5 per 1,000 cubic meters for gas imported from Russia or via Russian territory. Kiev hopes that the gas price will not exceed $300 in 2009, while the Ukrainian budget for next year is based on a price of $250.

However, Gazprom CEO Alexei Miller, who is currently holding talks with Central Asian gas producers, does not rule out hiking the price to $400 from next year. Gazprom's gas prices to Europe this October exceeded $500 per 1,000 cubic meters.

Earlier on Thursday, the Russian and Ukrainian prime ministers agreed on an intergovernmental gas memorandum that removes intermediary traders from bilateral energy cooperation.

Under the agreement, the parties will drop any gas intermediaries and switch to direct relations involving Russia's state-run Gazprom and Ukraine's national oil and gas company Naftogaz from January 1, 2009. Furthermore, Naftogaz will receive the right to re-export gas to the European Union jointly with Gazprom.

Until recently, the supply scheme involved the Swiss trader RosUkrEnergo, in which Gazprom holds 50%.


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