Yulia Tymoshenko, Ukraine's Prime Minister has been in a political tug-of-war with President of Ukraine Victor Yushchenko for the last four years.

Her latest shot across the bow: the dismissal of a Yushchenko-backed, 18-month-old production-sharing agreement with a small Houston oil company.

Vanco Energy, a closely connected firm owned by wildcatter Gene Van Dyke, drills offshore in deepwater areas, mainly in African countries such as Gabon and Ivory Coast.

In two years of negotiations with the Ukrainian government, Vanco conducted the agreement with a deputy prime minister as Yushchenko looked on. Tymoshenko has since declared the agreement corrupt and invalid.

In 2005, the Houston company that would not disclose its profits or revenues, had beaten out ExxonMobil and Hunt Oil in a government tender to negotiate rights to drill the potentially hydrocarbon-rich Prykerchenska shelf at the Black Sea.

The 30-year production agreement conducted in October gives Vanco the rights to survey and then drill Prykerchenska. The Ukrainians would obtain a 60.0% share of the production, with the remainder going to the Vanco company. In return, Vanco agreed to pay royalties, corporate profit taxes and all of the expenses.

Vanco, which says Ambassador of the USA William Taylor has provided assistance on the issue, disavows any not legall activity and admits it's willing to go to arbitration to prove its right to survey and develop Prykerchenska.

Previous week, it sued the Environment Ministry. "The ministries didn't know anything about the oil industry," said Van Dyke. "The block we got is what the government mentioned is available for bidding."