Russia and Ukraine have reached a messy compromise in their dispute over gas prices, allowing both sides to claim victory and calming fears of gas shortages in Europe this winter.

Under the deal, reached in Moscow in the early hours between the two countries' gas monopolies, Russia's Gazprom will be paid $230 per 1,000 cubic metres of gas exported to its ex-Soviet neighbour.

Ukraine will pay only $95 for the same unit, however, with the shortfall taken up by a joint venture trading company, RosUkrEnergo, that will become the country's sole provider of gas and will also take over responsibility for the transit pipelines taking Russian gas to the West.

"The talks ended successfully for Gazprom and Gazprom is completely satisfied," Alexei Miller, chief executive of the Russian company said as he and Oleksiy Ivchenko, head of Ukraine's Naftogas, announced the five-year contract.

"We reached an agreement - on mutually beneficial, mutually acceptable terms - that will make it possible to supply Ukraine with the full volume of gas it needs and provide for the transport of Russian gas to Europe," said his opposite number, Mr Ivchenko.

At first glance, the main loser in the deal should be RosUkrEnergo, which is owned by Gazprom and a Swiss subsidiary of Austria’s Raiffeisen Bank, although only as a nominee for unidentified Ukrainian interests.

A Gazprom spokesman, Sergei Kupriyanov, said that the intermediary company can pay and charge the different prices because it also buys cheap gas from the Central Asian nation of Turkmenistan that will be added to the mix.

President Viktor Yushchenko of the Ukraine has said that that the Turkmen gas, which forms the majority of Ukraine's gas imports, sells for about $50 per 1,000 cubic metres, slightly less than Ukraine had been paying for its Russian supplies.

The deal came only a few hours before European Union officials began a meeting in Brussels to co-ordinate their response to the gas crisis, which was brought to a head on New Year's Day when Russia cut off supplies to Ukraine. In response, Ukraine was said to have siphoned off gas being sent via its pipelines to Western Europe, causing a worrying drop-off in gas supplies to Europe.

Europe gets about a quarter of its gas from Russia, some 80 per cent of that arriving in pipelines that cross Ukraine. After a wave of criticism from Europe, Russia boosted the amount going into Ukrainian pipelines on Monday night and supplies appeared to have returned to normal today.

Both Ukraine and Russia claimed victory after the deal - Russia because it is now to receive a market price for its gas to replace Soviet-era barter arrangements, and Ukraine because it avoids having to pay that price in full.

But analysts saw it as more of a victory for Russia and questioned whether the $95 price level announced by the companies was what Ukrainian industry would really end up paying.