Putin said during a Web cast that Russia had been supplying its nearest neighbors with natural gas at privileged prices for 15 years and so had virtually provided with economic assistance worth $3-5 billion a year in the period.
A bitter dispute broke out last winter between Russia and Ukraine, as Russia's neighbor refused to pay increased prices for natural gas, which led to energy giant Gazprom briefly turning off the taps in January.
Putin said that Russia had been holding talks on the transfer to market relations for a long time with many partners, including with Ukraine.
He added that a shortfall in gas supplies to Europe in winter was due to Ukraine's tapping the gas rather than Russia failing to honor its contractual obligations.
"At the practical level we were unable to receive neither a definite answer nor reach any clarity on this issue," Putin said. "That is why, and I want to turn your attention to this, we were forced to cut off [natural gas] supplies not to western Europe, but to Ukraine. And [our] Ukrainian partners knew very well what results could follow and we did not restrict our gas supplies to European consumers, but [our] Ukrainian partners, who started siphoning off [the gas]."
He said that complicated and "almost dramatic relations with Ukraine" gave positive results for European consumers.
"We have switched to market prices, which are set not by the Kremlin or the government," Putin said having added that the price formula for Ukraine was calculated just like it would be for any European consumer.
"This is the first positive result of our agreements with Ukraine," Putin said. "Now we must give Ukraine and personally President [Viktor] Yushchenko their due. They took a correct, courageous step, and now we have divided these issues: natural gas for Ukraine and a contract on the transit of gas to Europe, which is not connected with our agreements with Ukraine. This enforces the guarantees of reliable supplies to Europe."
