Contract dispute could disrupt gas supplies to Europe

As of 31 December 2008, a contract agreement between the Russian gas company Gazprom and representatives from Ukraine is still being negotiated, increasing the possibility of disruptions to Europe's gas supply in 2009. Gazprom has demanded the payment of a US$2 billion debt and is threatening to cut gas supplies to Ukraine at 0700 UTC on 1 January 2009 if a contract has not been signed by the close of the year. Ukraine has reportedly transferred US$1.5 billion of the debt to an account for payment, but this has not yet be transferred on to Gazprom. In addition, the amount is US$100 million less than the original debt and does not include any of the US$4 billion in penalties and fees Gazprom claims Ukraine owes. Meanwhile, Gazprom alleged on 31 December that the head of the Ukrainian gas company Naftogaz threatened to confiscate Russian gas being transited to Europe in the event of a cut off. Supply disruptions were reported in Europe shortly following a similar cut off at the beginning of 2006; however, Ukraine is said to have greater reserves, which may limit the immediate effect of a cut off to Europe. In addition, Ukraine continues to assure that transport through its territory will be guaranteed, despite the reported threat.