Russia cuts off gas supplies

The Russian gas company Gazprom cut off supplies of natural gas to Ukraine on 1 January 2009 in response to a continuing dispute over debt payments. Gazprom previously indicated that it would shut down the supplies if Ukraine did not pay off a US$2 billion debt and sign a contract for 2009 by 1 January. There has thus far been little impact from the cut-off due to reserve supplies, but the possibility of supply disruptions increases the longer the dispute continues. Ukraine serves as a transit route for Russian gas shipments to Europe. Due to concerns over supply shortages in Europe as a result of the dispute and possible siphoning off of gas on the part of Ukraine, gas shipments have been increased on a pipeline running though Belarus. Negotiations are reportedly continuing, and Ukrainian officials have stated that they expect to have an agreement by Orthodox Christmas, which falls on 7 January. Even if supplies are resumed in the coming days, there remains the potential for a long term impact on Ukraine, as Gazprom is now indicating that it will charge Ukraine US$418 per 1,000 cubic meters of gas in 2009, which is more than double what it is currently paying.