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UPDATE 1-Russia, Ukraine outline terms for five-year gas transit deal to end row

Vladimir Soldatkin, Andrey Kuzmin and Natalia Zinets

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MOSCOW/KIEV, Dec 21 (Reuters) - Russia and Ukraine announced terms of a new gas transit deal on Saturday, under which Moscow will supply Europe for at least another five years via its former Soviet neighbour and which will a $2.9 billion payment to Kiev to end a legal row.

The deal is a major breakthrough for the both countries which have seeking to resolve their disputes over Ukraine's eastern Donbass region and the Crimea peninsula, which Russia annexed in 2014.

Under the new agreement, Russia's Gazprom, which supplies over a third of Europe's gas needs, would used an agent to book the transit of 225 billion cubic metres (bcm) of the fuel via Ukraine over five years.

Of the total 225 bcm, 65 bcm would be shipped in 2020, falling to 40 bcm in 2021 and in each of the subsequent years, Gazprom said. The Russian gas company would also pay Ukraine the $2.9 billion, part of the settlement, before Dec. 29.

In exchange, Ukraine is expected to sign a legal settlement and withdraw all outstanding claims also before Dec. 29, aiming to resolve the issue before the existing supply deal expires.

The presidents of Russia and Ukraine had met in Paris on Dec. 9 to discuss options for the Donbass settlement and terms for the new gas transit deal. The talks, known as the Normandy summit, were brokered by France and Germany.

Ukrainian Energy Minister Oleksiy Orzhel said on Saturday that, under the new deal, both parties had an option to extend the five-year term by another 10 years. He added that the transmission tariff for the Russian gas would rise.

(Reporting by Vladimir Soldatkin, Andrey Kuzmin, Maria Grabar in Moscow and Natalia Zinets in Kiev; Writing by Katya Golubkova; Editing by Edmund Blair)