Gazprom's official side of the story:
"Gazprom Confirms No New Contract with Ukraine After Talks Fail
After weeks of negotiations OAO Gazprom and NAK Naftogaz Ukrainy have reached a critical impasse in efforts to finalize a new contract for gas deliveries to Ukraine in 2009.
Gazprom has been doing everything in its power to make a success of the negotiations, but as there is no contractual basis for further gas supplies to Ukraine, Gazprom has no option but to reduce supplies to Ukraine by the amount committed to Naftogaz Ukrainy – without in any way reducing the quantities contractually committed to our onward customers in Europe – from 10:00 am Moscow time on Thursday, 1 January 2009.
The previous contract expired on Wednesday, 31 December 2008.
At issue are the following: the status of the repayment of $2 billion in debt owed to Gazprom for gas deliveries to Ukraine in November and December 2008, as well as fines and penalties; attempts by Naftogaz Ukrainy to amend a separate and pre-existing gas transit contract that is valid through 2010; and Ukraine’s apparent unwillingness to move towards fair market prices for gas supplies, despite signed agreements to do so.
On the issue of debt repayment, RosUkrEnergo has received a payment from Naftogaz Ukrainy in the amount of $1.5billion out of a total due of $2 billion. Naftogaz Ukrainy has recognized the $2 billion debt it owes Gazprom and had the money to pay that debt.
Naftogaz Ukrainy has also taken the radical step of tying the fate of the new gas delivery contract to changes to a pre-existing and wholly separate gas transit contract. The existing transit contract, valid through 2010, obliges Ukraine to transit at least 110 bcm of gas per year to Europe. Gazprom currently pays Ukraine a fee of $1.60 per 100 km, which is comparable to transit fees paid to other European countries.
Naftogaz Ukrainy is currently attempting to nullify this contract and double the agreed-upon transit fee. This desperate act puts at risk the stability of Gazprom’s natural gas supplies to Europe, something which Gazprom deeply deplores and for which it cannot be held in any way responsible.
On the issue of gas prices, the prime ministers of Russia and Ukraine, on 2 October, 2008, signed a memorandum of understanding on direct, long-term contracts and gradual price increases. The agreement set up a step-by-step, three-year period for Ukraine’s transition to purchases of Russian natural gas to market prices. Ukrainian Prime Minister Yulia Tymoshenko said at the time, “The parties confirmed their willingness to establish a gradual transition to market prices within three years.” Despite these assurances, Ukraine refused Gazprom’s offer of $250 per 1,000 cubic meters, nearly half of what Gazprom charges its western European customers.
Gazprom has taken every possible step to find a mutually acceptable solution, and to bring and keep both sides at the negotiating table. This is in spite of threats by Ukrainian government officials to call off talks in the final hours and reversals by Naftogaz Ukrainy on steps to transitioning Ukraine to market prices for gas.
Gazprom will continue to work hard with Naftogaz Ukrainy and our European partners to find a resolution that is both fair and commercially viable. Gazprom will also do everything it can to ensure that all volumes destined to our European customers are delivered in full."
And a Happy New Year to everybody..
Update: President Yushchenko's official website carries a statement signed by him and, significantly, by PM Tymoshenko [only recently called 'vorovka Yulyechka', or little thief Julie, by Yushchenko] declaring Ukraine has paid for all gas delivered up to 30th December 2008, and claiming the country has no debts before the Russian Federation. It claims Ukraine has sufficient gas in its vast underground storage facilities to last the country for a protracted period.
[No English version posted on the pres's site yet - the 1000+ presidential secretariat employees should get their fingers out of their *****
I seem to recall from three years ago, diverting the huges quantities of gas intended for delivery to Ukraine elsewhere, or reducing output from gas fields at source is technologically quite problematic for Gazprom, so the dispute may be resolved after a few days or weeks.]