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Image courtesy of Gazprom.

Ukraine’s state owned oil and gas company Naftogaz has set up a prepayment plan to pay down $5.3 billion in debt owed to Russia’s Gazprom.

The plan was made after persistent non-payment by Naftogaz and is in full compliance with the effective purchase and sale contract between the two companies.

“The future relationships between the companies are fully dependent on settling the debt payout issue,” Gazprom said.

Gazprom also said the reliability of its autumn and winter gas shipments into Europe through the Ukraine hinges on Naftogaz’s adherence to the payment plan.

The agreement comes on the heels of a legal dispute between the two companies about Gazprom’s pricing practices.

Naftogaz filed a $6 billion lawsuit against Gazprom alleging that the company has not reviewed its pricing in accordance with a price review process established by the companies in 2011, Ukraine news agency Interfax said.

Gazprom filed a $5 billion countersuit.

The dispute will be heard by an arbitration judge in Stockholm, Sweden. A hearing date has not been set yet.