Ukraine's Premier Yulia Tymoshenko says she has reached a deal with Russia's Gazprom over arrears for Russian natural gas.

Interfax news agency reported, "The debt for gas provided in 2007 is settled."

This is while Gazprom had earlier said that the two sides had failed to reach a deal, but that talks were to continue. However agreeement was eventually reached between Gazprom chief Alexei Miller and Ukrainian Prime Minister Yulia Tymoshenko.

Tymoshenko said that the Ukrainian government would approve paying off the debt for the October-December 2007 gas supplies at a meeting to be held on Friday, with payment to be made in a matter of days. She further added that she expected a deal to also be reached regarding the 2008 debt as well, AFP reported.

According to the arrangement, Ukraine has to pay off the debt at a price of USD 130 per 1,000 cubic meters.

This is while the Russian President, Vladimir Putin and his Ukrainian counterpart Viktor Yushchenko had announced back in February 12, that they had reached agreement in principle, to avert a threatened gas cut-off over Kiev's debts but the terms had yet to be finalized.

Ukraine's president in the meantime had accused Tymoshenko's government, of failing to carry out the agreement he reached with Putin, saying that only a fraction of the USD 1.5 billion amount had been paid.

Upon her return from Russia, Tymoshenko said that during her visit, the two sides had agreed to abolish a middleman company that was involved in the gas trade with Ukraine called UkrGazEnergo.

When she came to power in December last year, she had pledged to eliminate what she regarded as corruption in the two countries' gas relationship and wanted to stop the practice of using intermediaries in gas deals.

Ukraine depends on Turkmenistan and other former Soviet republics in Central Asia for around 75 percent of its gas supplies, with the rest coming from Russia.

SM/HAR