Ukraine's Prime Minister Yulia Timoshenko said the deal reached between the two country's presidents last week will stand, calming fears that she would challenge the agreement. But several details still need to be resolved.

At the start of 2006 Russia and Ukraine reached agreement on supplying gas through RosUkrEnergo, an intermediary that supplied gas to Ukraine. The company also profited by re-exporting it to European countries at higher prices.

That arrangement came to an end at the start of this year, when Gazprom asked Ukraine to repay a debt of $US 2.4 billion for Russian gas.

According to Ukraine, it’s RosUkrEnergo's problem as there is no direct deal between Gazprom and Ukraine’s Naftagas. This raised the prospect of a repeat of the 2006 shut off of gas to Ukraine. 

The impasse was resolved at the highest level. Presidents Vladimir Putin and Victor Yushchenko met in the Kremlin earlier this month. The deal was confirmed on Wednesday by the Prime Ministers.

“We discussed cooperation in the energy sector, including the gas problem. We stress the common need to act according to an agreement reached by the presidents of both countries on February 12,” said Russia’s PM Victor Zubkov.

As part of that deal Ukraine will settle a $US 1.5 billion debt to Gazprom. As a gesture of goodwill, Ukraine said it transferred $180 million on Wednesday as part of the debt settlement.

Both sides will also form a 50/50 joint venture RosUkrGas between Gazprom and Naftagas.

During a meeting with Timoshenko in Novo Ogarevo, President Putin stressed the importance of an even-handed deal.

Ahead of her visit to Moscow, Yulia Timoshenko made several calls to reopen the gas deal, but in Moscow she expressed her readiness to follow the plan of action agreed by the two presidents.

“It s the first time the two governments have set goals on each point of our cooperation. We are not going to sign more agreements but instead will set out our goals in each important sector that will lead to real results,” Timoshenko said.

On Thursday Timoshenko and Naftagas CEO Oleg Dubina will hold talks with Gazprom CEO Alexey Miller on these latest deals. They're also expected to outline the schedule of debt repayment to Russia.