Russia's state-run gas monopoly would pay 30-50 percent more for natural gas from Turkmenistan beginning next year.
The agreement - signed during a visit by OAO Gazprom chief Alexei Miller to the Turkmen capital, Ashgabat - is a small victory for Turkmenistan, whose gas reserves are second in the former Soviet Union only to Russia.
Russia currently controls virtually all of Turkmenistan's gas exports and is in increasing competition with the West - as well as China - for Central Asian energy exports.
Under the deal, Russia will pay US$130 (87 EUR) per 1,000 cubic meters of natural gas beginning in the first half of 2008, to be raised to US$150 (100 EUR) later in the year, Gazprom said in a statement.
Beginning in 2009, it will pay using a formula based on "market principles" that would then be used to calculate long-term contracts through to 2028, Gazprom said.
Gazprom, which currently supplies 25 percent of Europe's gas, now buys Turkmen gas at US$100 (67 EUR), then charges Western European customers US$260 (175 EUR) for the same volume of gas.
The deal was signed by Miller and President Gurbanguli Berdymukhamedov.
Since the death last year of Berdymukhamedov's autocratic predecessor, Russia and the West have stepped up their competition to secure more gas exports from Turkmenistan, as well as other Central Asian nations.
The United States and Europe have pressed Berdymukhamedov to agree to westward pipeline under the Caspian Sea to ship Turkmen gas through Azerbaijan and on to Turkey. Berdymukhamedov has said he was open to the possibility.
In May, however, Russia reached a deal with Turkmen officials for expanding an existing pipeline network to carry more Turkmen gas across Kazakhstan and Russia, along the Caspian Sea shoreline. That potentially will give Moscow yet more control over Turkmen gas.
Turkmen officials have long sought to raise the price Moscow pays for Turkmen gas.
Last week after meetings with visiting Russian Prime Minister Viktor Zubkov, Berdymukhamedov said construction of the new pipeline network could begin ahead of schedule in the first half of 2008.
Earlier this month, U.S. Energy Secretary Samuel Bodman traveled to Ashgabat for meetings with Berdymukhamedov, and he urged Turkmenistan to build new export routes.
"Pipelines naturally follow investment; they cannot come first. It is clear that Turkmenistan will need new export options. And it is welcome news that the president of Turkmenistan has said that all possibilities will be considered," he told an Ashgabat business forum, according to a U.S. Embassy transcript.
China is also angling for access to Central Asian energy. Turkmen and Chinese leaders in August launched the construction of a 7,000-kilometer (4,350-mile) pipeline that will supply China with up to 30 billion cubic meters of gas annually for 30 years.
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