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European Commission president Jose Manuel Barroso. Image courtesy of European Commission/Youtube.

After months of tense negotiations Ukraine and Russia finally inked a deal Thursday to resolve a long standing gas supply dispute centered around Ukraine’s $5 billion debt to Russian gas companies.

The deal was brokered by the European Commission and will resume gas deliveries to Ukraine during the winter in return for $4.6 billion in payments to service Ukraine’s debt.

Russia’s Gazprom cut off deliveries to Ukraine in June while the two company’s disputed the debt.

Ukraine will pay $3.1 billion in two tranches by the end of the year to Gazprom.

The deal also requires Ukraine to pay $1.5 billion upfront for about 4 billion cubic meters of gas to be delivered throughout the winter until March 2015.

Some of the funds earmarked for the gas purchases come from existing accords between the Ukraine, the EU and International Monetary Fund.

Revenues from Ukraine’s state owned gas company Naftogaz will also help pay for the new Russian gas delivers.

“Unprecedented levels of EU aid will be disbursed in a timely manner, and the International Monetary Fund has reassured Ukraine that it can use all financial means at its disposal to pay for gas,” the European Commission said.

Ukrainian Energy Minister Yuri Prodan said the country can afford to buy gas for the rest of 2014 at $378 per 1,000 cubic meters and at $365 in the first quarter of 2015.

Russian gas accounts for nearly a quarter of the EU’s total gas consumption. About half of that supply travels through Ukraine.

“There is now no reason for people in Europe to stay cold this winter,” European Commission president Jose Manuel Barroso said.