The price of natural gas Russia sells to Ukraine, and the transit cost levied by Ukraine on Russian gas pumped to the European Union, have proved a major source of contention since Russian energy giant Gazprom began hiking prices to the country in 2005 after years of subsidized supplies.
"We expect talks on signing a strategic contract on gas supplies to start. We are aware that we have to gradually reach market prices," Ukrainian premier Yulia Tymoshenko said.
Her Russian counterpart Vladimir Putin said: "My colleagues and I are ready to start this work."
Putin thanked Tymoshenko for prompt measures to repay Ukraine's debt for Russian natural gas supplies. The last installment of the debt was paid last month.
Ukraine, which transits about 80% of Russia's Europe-bound gas, threatened to start tapping fuel after Russia halved shipments to the country amid a dispute over Kiev's gas debt and supply scheme earlier this year.
European consumers did not report any shortfalls in supplies, however, unlike at the start of 2006, when a bitter pricing row led Moscow to briefly cut off deliveries to its ex-Soviet neighbor.
Moscow and Kiev resolved their latest gas dispute in mid-March, agreeing on the size of the debt and a supply scheme.
Under a contract signed with Gazprom in March, the Russian energy giant committed itself to supplying Ukraine with at least 49.8 billion cu m of Central Asian gas at $179.5 per 1,000 cu m from March until December 2008.
However, the price is set to rise considerably next year, as Uzbekistan, Turkmenistan and Kazakhstan announced they would begin exporting their natural gas at European-level prices from 2009.
Russia has been gradually raising prices for natural gas shipped to the former Soviet republics, and is already using market pricing for gas supplies to the three ex-Soviet Baltic States, which are now EU members.