The Russian energy giant has agreed to settle its long-running dispute with Ukraine over transit fees. A new five-year Moscow-Kyiv gas deal will also reduce European concerns over the loss of access to Russian fuel.
Russia and Ukraine have agreed to continue to send gas through Ukraine to Europe for a further five years.
The new deal, outlined by Moscow and Kyiv on Saturday, eases concerns over whether Europe could lose access to a large portion of Russian gas, which the region depends on to fuel industry and heating.
Russia sends roughly 40 percent of its gas deliveries destined for Europe through Ukraine.
The new five-year gas deal also includes the option to extend the agreement by an additional 10 years, according to the Ukrainian energy minister, Oleksiy Orzhel.
Ukraine to raise transit tariff
Officials expect at least 65 billion cubic meters of gas to be sent through Ukraine in 2020, and 40 billion cubic meters in the years following, Orzhel added.
That figure is, however, lower than what Russia delivered to Europe through Ukraine in previous years.
Orzhel told reporters that the gas transmission tariff would be higher than under the terms of the existing contract, which expires at the end of this year.
The deal also requires Russia to pay $2.9 billion (€2.62 billion) to settle an arbitration claim arising from previous transit disputes, said Alexei Miller, the head of Russia's natural gas monopoly, Gazprom.
Gazprom and Ukraine's Naftogaz had gone to an arbitration court in Stockholm in a number of disputes over gas prices and transit fees dating back to 2014.
Russian and Ukrainian officials expect to sign the contract before New Year's Day.
The current gas transit contract between the two countries expires at the end of the year and ties between them have been hostile following Russia’s aggression against Ukraine.
The agreement was outlined hours after US President Donald Trump approved sanctions on the Nord Stream 2 gas pipeline between Russia and Germany.
Read more: Germany condemns US 'meddling' after Washington sanctions Nord Stream 2
The US, along with Lithuania and several other European countries, staunchly opposes the project, which will send natural gas over 1,200 kilometres from Russia to Germany via the Baltic Sea.
Meanwhile, the Lithuanian president said after Zelensky’s visit in Vilnius on November 27 that Ukraine had the same target as Lithuania to diversify and reorientate its energy sources, without naming, away from Russia.
AP and Reuters contributed to the reporting