Ukraine's state energy firm Naftogas and Russia's Gazprom have signed a formal amendment to a gas contract cutting the price of Russian gas by a third for the first quarter of 2014.
The agreement brings to an end an ongoing dispute that has seen several twists in the Ukraine-Russia-EU relations in the past months and ended with Ukraine turning down an EU trade deal.
The gas prices will be subject to quarterly revisions, according to the agreement – a move seen as a leverage Russia can use to prevent Ukraine from rekindling its ties with the European Union.
Apart from Russia, Ukraine has been receiving gas from EU member states Hungary and Poland. However, this arrangement has been cancelled recently with Ukraine stating high prices as a reason. Most of the gas supplied to Ukraine from Hungary and Poland was originally bought from Russia.
In December, Russia agreed to slash the price of gas for Ukraine to $268.50 (£163.2) per 1,000 cubic metres after Kiev walked away from a free trade pact with the European Union.
Ukraine had been paying around $400 per 1,000 cubic metres to import an estimated 26-27 billion cubic metres from Russia, its main supplier, in 2013. In 2014, Ukraine plans to import 30 to 33 bcm of gas mostly from Russia.