Ukraine sought up to $4.2 billion to pay Russia for gas supplies as it struggles with a severe economic downturn. A payment dispute between the two nations halted European gas deliveries in January, cutting off heating to thousands of homes during the winter.
The EU has sought more transparent and commercial terms for how gas is traded between Russia and Ukraine. Both Russia's Gazprom OAO and Ukraine's Naftogaz are owned by their governments, leading to charges that the trade is more about politics than commerce.
Russia is Europe's biggest foreign supplier of gas. Most of it reaches Europe through pipelines across the Ukraine.
The European Commission said Ukraine has now promised to make changes to the way it runs that gas business which "should provide the stability needed to significantly reduce the risk of a further gas crisis."
In return, government-owned lenders will give the country a hefty loan package. The European Bank for Reconstruction and Development will lend Naftogaz up to euro300 million to help it restock Ukraine's gas storage for next winter. Next year, it could lend up to $450 million for the company to upgrade the gas transit system.
The World Bank is prepared to give the Ukrainian government up to $500 million for fiscal and structural reforms to pay for reforming the gas sector, social welfare payments and other government spending.
The European Investment Bank will also ready long-term loans of up to $450 million to help pay for upgrading the gas transit system.
