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Subject

Multiple Russian-Ukrainian gas disputes.

Significance

Ukraine's state-owned gas company Naftogaz accused Russian energy giant Gazprom on December 16 of encouraging a new confrontation over gas. It was responding to Gazprom's warning of possible interruptions to gas supplies to EU customers via Ukraine. The row follows the recent failure to agree on the resumption of direct Russian gas supplies to Ukraine. Naftogaz and Gazprom are still locked in legal battles.

Impacts

If no winter package is agreed, Ukraine may buy no Russian gas for another year.

Substantial purchases of Russian gas would hit the balance of payments and increase pressures on foreign reserves and the hryvnia.

A legal victory for Naftogaz would only increase Gazprom's determination to reroute all gas from Ukraine.

Gazprom will pursue alternative routes even if it wins favourable court rulings.

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