Russia and Ukraine have struck a deal that guarantees the flow of gas to Europe for a further five years, a day before the expiry of the previous 10-year contract between their national gas companies.  The new deal closes off a potential schism between Russia and Europe while benefiting  Ukraine financially.  Alexei Miller, Gazprom chief executive, said in a statement released late on Monday that the agreement between the Russian state-owned gas company and Ukraine’s Naftogaz had been reached after five days of talks in Vienna.

It is made up of a series of contracts encompassing a “large package deal restoring the interests of both sides”, Mr Miller said.  The agreement follows an initial protocol signed earlier this month assuring the market of uninterrupted supplies, which had pushed gas prices down.

Gas prices have been on the decline, losing nearly 20 per cent since December 19, according to market data, and fell again after the deal was announced. Russian president Vladimir Putin and his Ukrainian counterpart Volodymyr Zelensky welcomed the agreements in a phone conversation on Tuesday, according to the Kremlin’s website.  Both sides did not, however, reach agreement on direct gas supplies to Ukraine.

Following Russia’s 2014 annexation of Ukraine’s Crimean Peninsula, Kyiv halted direct purchases from Gazprom in 2015, opting instead to purchase gas largely of Russian origin from European suppliers through so-called reverse flow schemes. However, the two leaders spoke about developing Russian-Ukrainian relations in 2020. On Sunday, Ukrainian forces and Russian-backed separatists in eastern Ukraine completed an exchange of prisoners as the two countries negotiate to end their five-year conflict.

Germany, the largest European market for Russian gas, which had insisted on continued gas transit via Ukraine despite a planned direct route via the Baltic Sea, welcomed the agreement .