Gazprom and Ukraine yesterday reached agreement on natural gas supplies, putting an end to last week's tense standoff in which the Russian energy company halved supplies to Ukraine, a key transit artery to Europe.

The accord removes controversial middleman companies from the multi-billion dollar gas trade between Russia, Ukraine and central Asian gas suppliers - an apparent victory for Yulia Tymoshenko, prime minister of Ukraine, who has been highly critical of intermediaries. It also preserves a purchase price for central Asian gas this year of $179.5 per 1,000 cubic metres.

But Naftogaz Ukrainy, Ukraine's state energy monopoly, agreed to pay Rosukrenergo - the Swiss-registered intermediary that supplied Ukraine with gas in previous years - a rate of $315 for Russian gas it consumed without a contract in January and February.

Naftogaz agreed to Gaz-prom selling up to 7.5bcm of gas to industry. Both will compete in Ukraine's vast domestic market, which consumes 70bcm a year.

Sergei Kupriyanov, Gaz-prom spokesman, said the deal would grant it 25 per cent of Ukraine's industrial market, which consumes 30bcm of gas a year. Access was fixed for future years and prices were bound to rise, he added.

The accord follows a row last week in which Gazprom halved supplies to Kiev over its refusal to finalise supply agreements and pay $600m (£295m, €385m) in debt. Gazprom backed down late last week after Ukraine warned the reduction could dent shipments to Europe. Russia supplies 25 per cent of Europe's gas needs, mostly through Ukraine.

The struggle had centred on Ms Tymoshenko's refusal to sign off on a handshake agreement clinched in February by Viktor Yushchenko, Ukraine's president, and Vladimir Putin, his Russian counterpart. Then, the two sides had agreed for gas sales to Ukraine to be funnelled through two companies owned jointly by Gazprom and Naftogaz.

Ukraine's economy is struggling to adjust to consecutive gas price rises since the country shifted away from Moscow following the Orange revolution of 2004.

Ukraine satisfies much of its gas requirements with central Asian gas resold by Gazprom. Kazakhstan, Uzbe-kistan and Turkmenistan this week warned they would sharply increase prices in 2009.

Mr Yushchenko yesterday criticised the agreement for failing to shed light on next year's price. Naftogaz said exact details on supplies for this and next year were still being finalised.

The gas talks have been complicated by a rivalry between Ms Tymoshenko and Mr Yushchenko, who has accused the prime minister of straining relations with Moscow.

Taras Kuzio, a research associate from the Institute for European, Russian and Eurasian Studies at George Washington University, said the agreement was "a major victory" for Ms Tymoshenko, Ukraine and "European security".