In 2009, Russian natural gas company Gazprom refused to conclude a supply contract unless Ukrainian gas company Naftogaz paid its accumulating debts for previous gas supplies. The dispute began in the closing weeks of 2008 with a series of failed negotiations, and on January 1, 2009 Russia cut off gas supplies to Ukraine. On January 7 the dispute turned to crisis when all Russian gas flows through Ukraine were halted for 13 days, completely cutting off supplies to Southeastern Europe, most of which depends on Russian gas, and partially to other European countries.The Russo-Ukrainian gas dispute of January 2009: a comprehensive assessment Oxford Institute for Energy Studies, Retrieved on 19 June 2012
Throughout the crisis the Russian and Ukrainian sides blamed each other for the cutoff. On January 11 and 12, the European Union deployed an independent monitoring mission in an attempt to solve the crisis, but the mission met with little success. On January 12, Gazprom announced that it was willing to start delivering gas through the Sudzha metering station into the pipeline that traverses Ukraine towards Southeastern Europe, but Ukraine refused the offer for technical reasons and instead suggested an alternative route through Valuyki and Pisarevka metering stations, additionally insisting that supplies be fully restored. This was refused by Gazprom.
On January 18 the dispute was resolved when Russian prime minister Vladimir Putin and his Ukrainian counterpart Yulia Tymoshenko negotiated a new contract that covered the next ten years. (On October 11, 2011, a Ukrainian court sentenced Tymoshenko to seven years in prison for abuse of office in her role of signing this deal. In the aftermath of Euromaidan, this sentence was overturned under suspicion of being political reprisal from her 2010 Presidential election rival Viktor Yanukovych, and the judge who handed down the sentence fled the country after being charged with giving a "deliberately unlawful verdict.")
Gas flows to Europe restarted on the morning of January 20, and were fully restored within two days. In the aftermath, Gazprom was estimated to have lost US$1.5 billion in revenues due to lack of sales, and Ukraine was speculated to have incurred major economic losses. Analysts point out that the crisis had a negative and possibly irreversible impact on the reputations of both Russia as an energy supplier, and Ukraine as a transit country. There is no consensus amongst analysts on who bore the most responsibility for the crisis. Due to the absence of international monitors on both sides of the Ukrainian pipeline system, it is impossible to determine with certainty who was responsible for interrupting gas flow to Europe.
Background
Throughout 2008 there were numerous contract and pricing disputes between Russian and Ukrainian gas/transit companies. In October 2008, Ukrainian prime minister Yulia Tymoshenko and Russian prime minister Vladimir Putin signed a deal that included provisions to raise import prices and transit tariffs to "market, economically based and mutually agreed levels" within three years, and that Naftogaz would buy gas directly from Gazprom and be the sole importer to Ukraine, removing intermediaries. In November, Gazprom and Naftogaz signed a long-term contract with similar provisions; however, this document differed in that it referred to transit fees remaining at their 2008 level and didn't specify an import price.
In the third week of November, Gazprom CEO Miller announced that if no agreement was reached by the end of the year, prices could rise significantly higher than what was currently being proposed. A few days later Prime Minister Putin warned that if there was any interference with transit gas, supplies to Ukraine would be cut off. These warnings were repeated throughout December, with additional warnings that disruptions to European supplies could result. The European Commission did not attempt to intervene, but the Energy Charter Secretariat issued a statement on December 23 which recalled the principle of uninterrupted transit. This was seen as a reminder to Ukraine of its obligations under the Energy Charter Treaty, which it has signed and, unlike Russia, ratified.
Large amounts of debt remained outstanding by year's end. Naftogaz CEO Vladimir Trykolych said that Naftogaz owed $1.26–1.27 billion to RosUkrEnergo in total, but claimed that Naftogaz had no debt to Gazprom. However, on December 2, Naftogaz acknowledged that it owed $1 billion to Gazprom, and said it was having trouble making payments on time due to unexpected losses in 2008. Later in mid-December, Gazprom stated that a debt of $2.195 billion had accumulated. In response, Naftogaz made a payment of $800 million, and promised to pay another $200 million soon. Gazprom proposed to make an upfront transit payment at the 2008 rate in order to provide funds for the debt to be cleared, but Naftogaz rejected the offer.
On December 19, Gazprom released a statement saying that no supply contract could be signed for 2009 because Ukraine said it would not make any more payments in 2008. This was denied by a Naftogaz spokesman. On the same day, Ukrainian president Viktor Yushchenko's spokesman on international energy security stated that Ukraine had paid for its October and September supplies, and that although it still had to pay for November's supply before the end of 2008, no other payments would be due until the end of January. On December 23, President Yushchenko said that part of the debt was restructured for January – February 2009, but Gazprom denied that there was any such agreement and said that it remained committed to cut supplies to Ukraine on January 1 if Ukraine did not pay its remaining $1.67 billion debt for gas supplies and an additional $450 million in fines.
By December 30, Naftogaz made a payment of $1.522 billion to RosUkrEnergo for outstanding gas deliveries. RosUkrEnergo confirmed receiving this payment but said that Naftogaz still owed $614 million in fines, (although later on January 2, Naftogaz insisted that no further amounts of debt were outstanding, and said it was ready to go to international arbitration to resolve the issue). Along with the payment, the chief executive of Naftogaz, Oleh Dubyna, wrote a letter to Gazprom threatening that if it delivered gas for transit to Europe, Naftogaz would consider the gas to belong to an "unidentified owner" and could confiscate it under Ukrainian customs law. This was received as a threat to divert gas as Ukraine had done during the 2006 gas dispute.
On December 31, after which gas supplies to Ukraine would be cut off, the two parties failed to come to an agreement on import and transit prices, and obstacles remained. Naftogaz promised to transit gas to Europe even if supplies to Ukraine were cut, however, it added that without a contract in place it would not supply technical gas and would instead take gas from Russia's volumes to keep the system functioning. Gazprom refused, arguing that this would be theft.Simon Pirani, Oxford, page 3 Retrieved on October 16, 2009
Crisis
Gas supplies to Ukraine cut off Deliveries of 90 mmcm (million cubic meters) of natural gas per day designated to Ukraine were fully cut on January 1, 2009 at 10:00 MSK. Transit deliveries to the EU continued at a volume of 300 mmcm per day. President Yushchenko and Prime Minister Tymoshenko, in a joint statement, confirmed that Ukraine guaranteed the uninterrupted transit of gas to Europe. They also promised that Ukrainian citizens would be provided with gas in full volume from Ukraine's gas storage facilities. According to Viachaslau Herasimovich, energy analyst at independent think-tank CASE Ukraine, Ukraine had enough natural gas to last between 100 and 110 days without Russian gas (reserves in underground storage were enough to last about 80 days, plus extra days from the amount of gas Ukraine itself could produce before the exhaustion of existing reserves).
President Yushchenko sent a letter to President of the European Commission Jose Manuel Barroso on January 1, proposing the European Union's involvement in settling the dispute. According to Interfax-Ukraine, this proposal was first initiated by the EU. A Ukrainian delegation of representatives was then sent to the Czech Republic (holding the current EU Presidency) to hold consultations with a number of EU member states.
On January 3, Naftogaz claimed that Gazprom had not paid the transit fees since January 1 and owed it $40 million. According to Gazprom, the transit fee was based on a long-term contract which was signed by both parties on June 21, 2002, and would expire at the end of 2013.
On January 4, two days after gas supplies to Europe were first reported to be falling, the Czech EU Presidency, on behalf of the EU, made a statement calling for an "urgent solution" to the dispute, and for an "immediate resumption" of full deliveries of gas to the EU member states. According to the statement, "energy relations between the EU and its neighbours should be based on reliability and predictability." On the same day both RosUkrEnergo and Gazprom filed lawsuits against Ukraine and Naftogaz respectively with the Stockholm Tribunal of the Arbitration Institute of the Stockholm Chamber of Commerce. Russia and Ukraine also said they would file lawsuits at the arbitration court.
On January 5, Kyiv's economic court ruled to ban Naftogaz from transiting Russian gas in 2009 at a price of $1.60 per 1,600 cubic meters per 100 kilometers. The court decided to satisfy a ministry appeal that declared ineffective agreements on Russian gas transit via Ukraine "because the agreements were signed by the former deputy head of the Naftogaz Ukrainy board, Ihor Voronin, who was not empowered by the Cabinet of Ministers of Ukraine to do that", according to the statement.
Gas supplies to Europe cut off
On January 5, in a televised conversation between Prime Minister Vladimir Putin and Gazprom CEO Alexei Miller, Putin agreed with a proposal by Miller to reduce gas flows to Europe via Ukraine. Putin elaborated that the gas flow should be reduced by the amount Ukraine had allegedly stolen since deliveries ended on January 1, and instructed Miller to inform Gazprom's European partners.The Russo-Ukrainian gas dispute of January 2009: a comprehensive assessment Oxford Institute for Energy Studies, section 3, Retrieved on October 13, 2009
On January 6, Gazprom deputy CEO Aleksandr Medvedev stated at press conferences in both London and Berlin that Ukraine had blocked three of the four transit lines "in an unprecedented and unilateral move". Naftogaz denied the accusation and said it had used its own gas for technical purposes. President Yushchenko stated that during the course of the day Gazprom had sharply cut supplies to Europe via Ukraine from 262 mmcm to 73.6 mmcm. Later a Gazprom spokesman stated that Gazprom had only put 64.7 mmcm into the system, and that it was expecting Ukraine to make up the remaining 65.3 mmcm needed to make the total order of 130 mmcm. In a telegram sent to the leadership of the European Union and heads of European states that consume Russian natural gas, President Yushchenko said "Ukraine consumes only the gas it produces itself and gas pumped into Ukrainian storage facilities, which has been paid for in full". The president also claimed that Russia planned to stop or significantly reduce Russian gas transit through Ukraine.