The European Union, Ukraine and international lenders reached a deal on Friday on gas sector reforms in the ex-Soviet republic that would pave the way for financial aid the country needs to pump gas to Western Europe, Reuters reported.
"I'm extremely pleased that political agreement has been reached with Ukraine on reform of its gas sector which opens the way for a financial assistance package to be provided by the International Financial Institutions to Ukraine," European Commission President Jose Manuel Barroso said in a statement.
The agreement is intended to help national gas firm Naftogaz pay its debts and prevent a repeat of a gas crisis in January when supplies of Russian gas via Ukraine were interrupted during two weeks of freezing weather.
Sources close to the talks have said Ukraine is seeking as much as $4 billion in a loan, partly to buy Russian gas for storage ahead of the winter so that it can keep pace with soaring European demand.
But international banks had refused to lend money until Naftogaz ends years of subsidising household gas supplies and finds ways to force domestic companies to pay their bills.
The Commission did not give details on the reforms Ukraine had agreed to.
"The commitments made by Ukrainian Prime Minister (Yulia) Tymoshenko should ensure increased transparency and long-term viability of Ukraine's gas sector, and I very much hope that the strict timeframes set out in the reform agenda are fully respected," Barroso said.
Tymoshenko pledged in a letter to the EU this month that domestic gas prices would be raised, but that is likely to be an unpopular strategy in the run-up to Ukraine's January elections.
Tension in Ukraine's relations with former Soviet master Moscow have also heightened fears of another gas crisis.
Ukraine transports about a fifth of the European Union's gas needs.
"I believe this agreement should help Ukraine become a more reliable energy partner for the benefit of both the European Union and Ukraine's own people," Barroso said.