KIEV, May 11 ??“ The government on Thursday accepted resignation of Oleksiy Ivchenko, the head of Naftogaz Ukrayiny, the national oil and gas company, following weeks of persistent disputes over the company??™s spending plan this year.

The departure of Ivchenko, who signed a controversial natural gas agreement with Russia in January, is a step that may help political groups strike a coalition agreement later this month.

Two biggest groups that have been recently elected to Parliament, the Regions Party and a group led by former Prime Minister Yulia Tymoshenko, have been insisting on Ivchenko??™s dismissal.

Ivchenko, who plans to focus on work in Parliament, has been recently suggesting he would step down if Tymoshenko were to secure the post of the prime minister in the future government.

There were reports Wednesday that three pro-Western groups, including Our Ukraine, the Tymoshenko group and the Socialist Party, have been making progress in drafting the coalition agreement.

The position of the head at Naftogaz is extremely important as the company is the dominant natural gas producer and shipper in Ukraine. Naftogaz??™s role is also instrumental in improving the country??™s energy security by pushing for diversified imports of oil and gas.

???The most important thing now is to make sure Naftogaz continues to operate, that the gas is available, prices are unchanged, and consumers get steady supplies,??? Energy and Fuel Minister Ivan Plachkov said.

Plachkov said the government has not yet nominated anyone to the post, suggesting that the candidate may be nominated by groups that are seeking to create the coalition.

Naftogaz is also the biggest corporate taxpayer in Ukraine and its role is important in meeting the government??™s 2006 budget revenue targets, analysts said. Naftogaz paid $2.5 billion in taxes in 2005, while the plan set the tax payment at $1.8 billion in 2006.

Two weeks ago the government restricted indefinitely spending by Naftogaz this year amid concerns that the company may run into financial difficulties.

Finance Minister Viktor Pynzenyk, who engineered the restrictions, said the measures will be intact until Naftogaz and ministry officials come to terms over the company??™s disputed spending plan in 2006.

Naftogaz??™s original spending this year had a financial gap of about $1.7 billion, apparently due to a number of overseas oil and gas development projects. Pynzenyk had insisted Naftogaz should have cut the spending dramatically.

Meanwhile, Naftogaz has been experiencing some financial difficulties earlier this year, especially in March and April, due to a 95% hike in prices of imported natural gas since Jan. 4.

Naftogaz has been reportedly facing a $700 million debt owed to RosUkrEnergo, a gas trader controlled by Gazprom, and has been increasingly relying on borrowing overseas to meet its financial obligations.

Ivchenko is also the leader of the Congress of Ukrainian Nationalists, a small party with powerbase in western regions of Ukraine that has strong anti-Russian sentiment.

Appointment of a more centrist figure to the top Naftogaz job could potentially help to improve relations with Russia??™s Gazprom, some analysts suggested. (jp/ez)