But the success of the agreement will depend on Russian gas monopoly Gazprom, through whose pipelines any Turkmen exports to Ukraine must pass.

The agreement was signed by chairman Berdymurad Redzhepov of the state trade corporation Turkmenneftegaz and Ihor Bakai, head of Ukraine's state oil and gas company.

It coincided with a working visit to Turkmenistan by Ukraine's president Leonid Kuchma, who said that he was hopeful the flow of gas would start soon.

``I understand that the gas barrier will be lifted as early as tomorrow (Thursday) and that by the New Year Turkmen gas will be on its way,'' he said after the signing ceremony.

``In my New Year's address I will be able to say that everyone will have electricity and heating.'' A representative of the oil and gas industry and mineral resourcesministry told Reuters that the agreement for 1999 deliveries was worth $720 million.

He said that Ukraine would buy the gas at the Turkmen-Uzbekborder for $36 per thousand cubic metres. Ukraine would pay 40 per cent of the costs in cash, with the remainder being paid through trade and construction projects.

By the time the gas reached Ukrainian soil the cost of one thousand cubic metres would have risen to around $70, the official said.

He added that Bakai would hold talks with Gazprom officials on Friday this week to discuss the terms of the deal.

Gazprom and Turkmenistan fell out over gas transportation costs in March, 1997, after which Turkmenistan was virtually cut off from markets in the former Soviet Union and beyond.

The disagreement rendered last year's deal between Turkmenistan and Ukraine for exports of 20 bcm of gas in 1998 meaningless.

Production slumped, and the desert state of four million was severely hit by the blockade, which western bankers said cost it $1.8 billion in potentiallost revenues.

Turkmen president Saparmurat Niyazov said that total exports in 1999 should reach 31 bcm, including 20 bcm to Ukraine and 11 bcm through a new pipeline link South to Iran.