KIEV, Oct 24: Ukraine and Russia reached an agreement on Tuesday on a compromise gas price, Russia's ambassador said, opening the way to reduce tensions between the two countries and an easing of European concerns about the reliability of Russian energy supplies.

"We have reached the agreement," Ambassador Viktor Chernomyrdin told reporters in Kiev during a visit to the Ukrainian capital by Russian Prime Minister Mikhail Fradkov.

The price he announced of "130 dollars" (103 euros) for 1,000 cubic metres of Russian gas marks an increase on the current $95 that Ukraine pays, but is less than a demand for $230 per 1,000 cubic metres that the Gazprom energy giant had sought 10 months ago.

Ukrainian Prime Minister Viktor Yanukovych also reported that agreement on next year's price had been reached.

"We have received confirmation by telephone that the negotiations have finished in Moscow that the volume of gas deliveries to Ukraine will increase to at least 55 billion cubic metres, at a price that will not exceed $130," Yanukovych told journalists.

A Gazprom spokesman contacted by AFP in Moscow declined to comment.

Ukraine and Russia's disagreements over gas have been at the centre of a crisis in relations and prompted Moscow to briefly cut off supplies to Ukraine at the start of this year, leading to knock-on disruption of supplies across Europe.

The question of gas prices is also a critical one for Russian-Ukrainian relations, as nearly all of Ukraine's energy imports come via Russia.

The recent problems have prompted greater attention to energy security on the part of EU leaders, who met with President Vladimir Putin last week in Helsinki to discuss the issue.

Eighty per cent of Russian gas supplies to Europe pass through Ukraine.

Analysts said earlier that the relatively good deal for Ukraine would come at a political price, with Moscow expecting pro-Russian Yanukovych to continue efforts to slow or reverse the pro-Western course launched by "orange revolution" leader President Viktor Yushchenko.

The Ukrainian edition of the Russian economics weekly Expert said earlier that Yanukovych was "sending Moscow all possible signs of loyalty" and that this had been well received.

Russia's Kommersant newspaper said earlier that one demand may be that Ukraine holds an early referendum on the country's entry into Nato -- an outcome that could scotch Yushchenko's ambitions for the Nato membership due to currently low levels of public support.

The Ukrainian business weekly Kontrakty said that Ukraine may struggle not to lose control over its gas pipeline network, which has long been eyed by Gazprom, while Expert reported there had been "secret promises" from Kiev on selling the Russians shares in unidentified industrial assets.—AFP