2.3.5. Threats and New Contract in 2007–2008

In late 2007, Russia increased the gas price to Ukraine to \$179.50/1000 m3, and Ukraine increased the transit tariff to \$1.7/1000 m3/100 kilometres [2,34]. In early 2008, Ukraine put these arrangements in doubt. By February Gazprom complained that Ukraine was taking gas in transit to Europe [2,34]. When the negotiation ran into some difficulties, Gazprom briefly reduced the supply of gas to Ukraine on 3 March 2008. Naftogaz replied that it could not guarantee the transit of gas to Europe if Gazprom decreased the supplies to Ukraine.

In October of 2008, Russia and Ukraine annulled the January 2006 contract and agreed on the following: (1) the price and tariff would increase gradually over three years; (2) Ukraine guarantees a reliable transit of gas; (3) Gazprom and Naftogaz would jointly export some gas to Europe [2]. Gazprom shared its lucrative European market with Naftogaz by allowing Ukraine to re-sell some of the gas to incentivise Ukraine for a peaceful implementation of the contracts.

### 2.3.6. Gas Wars and Debts Problems in 2009

On 2 December 2008, Naftogaz acknowledged that it faced difficulty repaying around \$1 billion owed for Russian gas. In mid-December, Gazprom stated that the debt grew to \$2.195 billion, and in response, Naftogaz paid \$800 million [2]. On 19 December, Gazprom said that if Naftogaz does not pay the balance by the end of 2008, no supply contract would be signed for 2009. Previously Gazprom stated that if no agreement was reached by the end of 2008, the gas price could rise to \$400/1000 m3.

On 30 December, Naftogaz paid \$1.52 billion but disagreed with penalties of \$614 million. On 1 January 2009, Gazprom cut gas supply to Ukraine, while supplies to Europe continued. On 4 January, Gazprom claimed that Ukraine had stolen 50 million m3 of gas, the next day the claim increased to 65.3 million m3. Gazprom requested that Ukraine supplied this volume to Europe from its own resources. Naftogaz stated that it took 52.2 million m<sup>3</sup> as technical gas (Technical or fuel gas is required to run the compressor stations along a pipeline. The general practice is that technical gas is provided by the transit country and included in the transit tariff) [2].

On 6 January, Ukraine stated that Gazprom sharply reduced the gas flowing into the transit pipeline. Gazprom said that it provided only 64.7 million m3 out of 130 million m<sup>3</sup> required on that day expecting Ukraine to add the missing 65.3 million m3. On 7 January, Gazprom stated that it had stopped all deliveries into the transit pipeline because Ukraine had closed it; Naftogaz said that it had closed the pipeline because Gazprom had stopped the supplies [2].

In the following days, the European Union prepared the terms of reference for a monitoring mission with representatives from both sides of the conflict and major European gas companies. Deployment of the monitoring mission did not result in the resumption of the supply of gas. Russia claimed that the gas could not flow because the transit pipeline was blocked; Ukraine said that no gas was supplied. Naftogaz requested that Gazprom should provide both the technical gas and linepack (Linepack gas is the gas that is maintained within the pipeline to keep the pressure and ensure uninterrupted flow) gas of 140 million m3 [2].

On 19 January, Russia and Ukraine finally signed an agreement to end the dispute. Gas flow to Europe restarted on 20 January and was back to normal after two days. The contract stated that 40 bcm would be delivered to Ukraine in 2009 and 52 bcm per year afterwards. The take or pay provision was 80%. The gas price would be 80% of the European price (netback from the German border) in 2009 and 100% beginning in 2010. The annual transit volume would be at least 110 bcm per year. The transit tariff was set at \$1.7/1000 m3/100 kilometres for 2009 and \$2.04/1000 m3/100 kilometres, plus an element of the 2009 gas price, for 2010. From 2011 the transit tariff would be indexed to EU inflation [2].

During the 2009 gas dispute, both sides clearly added to the creation and escalation of the dispute. The final payment for the debts by Ukraine was probably too late, there was no time left to make the 2009 agreement before the start of the year.
