2009 Russia–Ukraine gas dispute

in his office in the Kremlin (July 21, 2008) Throughout 2008 there were numerous contract and pricing disputes between Russian and Ukrainian gas/transit companies. In October 2008, Ukrainian prime minister Yulia Tymoshenko and Russian prime minister Vladimir Putin signed a deal that included provisions to raise import prices and transit tariffs to "market, economically based and mutually agreed levels" within three years, and that Naftogaz would buy gas directly from Gazprom and be the sole importer to Ukraine, removing intermediaries. In November, Gazprom and Naftogaz signed a long-term contract with similar provisions; however, this document differed in that it referred to transit fees remaining at their 2008 level and didn't specify an import price. In the third week of November, Gazprom CEO Miller announced that if no agreement was reached by the end of the year, prices could rise significantly higher than what was currently being proposed. A few days later Prime Minister Putin warned that if there was any interference with transit gas, supplies to Ukraine would be cut off. These warnings were repeated throughout December, with additional warnings that disruptions to European supplies could result. The European Commission did not attempt to intervene, but the Energy Charter Secretariat issued a statement on December 23 which recalled the principle of uninterrupted transit. This was seen as a reminder to Ukraine of its obligations under the Energy Charter Treaty, which it has signed and, unlike Russia, ratified. However, on December 2, Naftogaz acknowledged that it owed $1 billion to Gazprom, and said it was having trouble making payments on time due to unexpected losses in 2008. Later in mid-December, Gazprom stated that a debt of $2.195 billion had accumulated. In response, Naftogaz made a payment of $800 million, and promised to pay another $200 million soon. Gazprom proposed to make an upfront transit payment at the 2008 rate in order to provide funds for the debt to be cleared, but Naftogaz rejected the offer. On December 19, Gazprom released a statement saying that no supply contract could be signed for 2009 because Ukraine said it would not make any more payments in 2008. This was denied by a Naftogaz spokesman. On the same day, Ukrainian president Viktor Yushchenko's spokesman on international energy security stated that Ukraine had paid for its October and September supplies, and that although it still had to pay for November's supply before the end of 2008, no other payments would be due until the end of January. RosUkrEnergo confirmed receiving this payment but said that Naftogaz still owed $614 million in fines, (although later on January 2, Naftogaz insisted that no further amounts of debt were outstanding, and said it was ready to go to international arbitration to resolve the issue). Along with the payment, the chief executive of Naftogaz, Oleh Dubyna, wrote a letter to Gazprom threatening that if it delivered gas for transit to Europe, Naftogaz would consider the gas to belong to an "unidentified owner" and could confiscate it under Ukrainian customs law. This was received as a threat to divert gas as Ukraine had done during the 2006 gas dispute. ==Crisis==

Gas supplies to Ukraine cut off Deliveries of 90 mmcm (million cubic meters) of natural gas per day designated to Ukraine were fully cut on January 1, 2009 at 10:00 MSK. Transit deliveries to the EU continued at a volume of 300 mmcm per day. President Yushchenko and Prime Minister Tymoshenko, in a joint statement, confirmed that Ukraine guaranteed the uninterrupted transit of gas to Europe. They also promised that Ukrainian citizens would be provided with gas in full volume from Ukraine's gas storage facilities. President Yushchenko sent a letter to President of the European Commission Jose Manuel Barroso on January 1, proposing the European Union's involvement in settling the dispute. According to Interfax-Ukraine, this proposal was first initiated by the EU. A Ukrainian delegation of representatives was then sent to the Czech Republic (holding the current EU Presidency) to hold consultations with a number of EU member states. On January 3, Naftogaz claimed that Gazprom had not paid the transit fees since January 1 and owed it $40 million. According to Gazprom, the transit fee was based on a long-term contract which was signed by both parties on June 21, 2002, and would expire at the end of 2013. On January 4, two days after gas supplies to Europe were first reported to be falling, On the same day both RosUkrEnergo and Gazprom filed lawsuits against Ukraine and Naftogaz respectively with the Stockholm Tribunal of the Arbitration Institute of the Stockholm Chamber of Commerce. Russia and Ukraine also said they would file lawsuits at the arbitration court. Gas supplies to Europe cut off On January 5, in a televised conversation between Prime Minister Vladimir Putin and Gazprom CEO Alexei Miller, Putin agreed with a proposal by Miller to reduce gas flows to Europe via Ukraine. Putin elaborated that the gas flow should be reduced by the amount Ukraine had allegedly stolen since deliveries ended on January 1, and instructed Miller to inform Gazprom's European partners. On January 6, Gazprom deputy CEO Aleksandr Medvedev stated at press conferences in both London and Berlin that Ukraine had blocked three of the four transit lines "in an unprecedented and unilateral move". Naftogaz denied the accusation and said it had used its own gas for technical purposes. President Yushchenko stated that during the course of the day Gazprom had sharply cut supplies to Europe via Ukraine from 262 mmcm to 73.6 mmcm. Later a Gazprom spokesman stated that Gazprom had only put 64.7 mmcm into the system, and that it was expecting Ukraine to make up the remaining 65.3 mmcm needed to make the total order of 130 mmcm. On January 7, all Russian gas flow through Ukraine was halted, completely cutting off supplies to Southeastern Europe, much of which is completely reliant on Russian gas, and partially to other parts of Europe. Miller stated that Gazprom had stopped all gas deliveries to Ukraine because Ukraine had closed the system down, but Naftogaz said it closed down the system because Gazprom had stopped delivering gas. According to the Ukrainian presidential envoy for international energy security, Bohdan Sokolovsky, Ukraine had no technical capability to stop the pumping of Russian gas into its territory. He claimed that all pumping stations through which gas is supplied to Ukraine are located in Russia. On January 8, the European Union released a six-point declaration. The declaration stated that Russia and Ukraine had failed to show sufficient determination in solving the problem which was damaging to both their reputations. It urged both Russia and Ukraine to fulfil their respective obligations as supplier and transit country and to immediately restore gas supplies to Europe. It also requested that both parties accept independent monitoring of the flow of gas in the pipelines. Later in the day officials from Gazprom and Naftogaz met with EU officials in Brussels to look for an end to the crisis. Ukraine agreed to guarantee the unimpeded transit of natural gas on the condition that Gazprom would guarantee and supply the technical gas that was required for the system to function, but this was rejected by Russia, as it considered this the responsibility of Ukraine. On January 11, Putin stated that Russia was willing to take part in the privatization of Ukraine's gas transport system if Ukraine agreed. He also suggested that the EU should lend Ukraine the cash to pay off its debts. EU monitoring agreement On January 7, after Russian gas deliveries to Europe through Ukraine were completely halted, German chancellor Angela Merkel phoned both the Russian and Ukrainian prime ministers and reached an agreement with them that "experts from the European gas industry and the EU be sent quickly to determine on both sides of the Russia–Ukraine border..the cause of the transmission problems". For the next four or five days the commission focused on coming up with terms of reference for an agreement to be signed by all parties. On January 9, the Gas Coordination Group met and discussed different measures to help the situation, including temporary increases in production, increasing storage withdrawal, fuel switching, and increasing LNG imports. On January 11, Topolánek flew to Kyiv where he presented the agreement to Ukrainian representatives, and Ukraine signed the protocol. However, Prime Minister Tymoshenko added the handwritten words "with declaration attached" next to her signature. effectively blaming the Russian side for the crisis. Russia was not willing to accept this, and another day was lost. Topolánek later told Putin during a telephone conversation that Ukraine's declarations were non-binding and only represented the opinion of Ukraine, but Putin asked Topolánek to send Russia a protocol without any additions and declarations. After a phone call by European Commission President Jose Manuel Barroso that same day, Tymoshenko agreed to separate the two documents. On January 12, all three parties re-signed the protocol without any amendments and monitors were deployed. The monitoring mission included the EU Commission's officials, experts from the European gas companies, such as E.ON Ruhrgas, Eni and GDF Suez, as well as representatives of Gazprom, Naftogaz, and the Ukrainian and Russian energy ministries. Originally Ukraine did not accepted Gazprom's demand to include Gazprom's experts in the mission, but the objection was later withdrawn. This arrangement was criticized by the Deputy Foreign Minister of Ukraine Kostyantyn Yeliseyev, who said that Ukraine risked losing control over its gas transit system with the inclusion of monitors from European companies in which Gazprom is a shareholder. He claimed it was "another attempt by the Russians to deprive Ukraine of its entire gas transit system." Attempts to restore gas supplies Although international monitors had been deployed, it became clear by the next day that they would have nothing to monitor, as mutual accusations between Russia and Ukraine over who was responsible for blocking gas flow continued. The Russian side claimed that its attempts to restore gas flow were still being blocked, while the Ukrainian side argued that no supplies could be received because no technical agreement had been reached between the parties. Naftogaz sent a letter to Gazprom CEO Alexei Miller arguing that Gazprom was not only responsible for supplying technical gas, but also additional linepack gas of in order to restart the system. On January 12, Gazprom announced that it was ready to start delivering gas through the Sudzha metering station that traverses Ukraine towards Southeastern Europe, but Ukraine refused the offer, claiming this would have left its eastern regions of Donetsk, Luhansk and portions of Dnipropetrovsk starved of gas. Naftogaz suggested an alternative route through the Valuyki and Pisarevka metering stations, but later added that it was unprepared to partially accept gas for transfer to Europe. It insisted that deliveries be fully restored because the system had been partially reconfigured to work in reverse in order to supply consumers in eastern Ukraine with backup supplies, and European transit pipelines were working in such a way that they were unable to accept Russian gas for transit to Europe without cutting off those eastern regions. and Alexey Miller (with Yulia Tymoshenko and Vladimir Putin standing in the background) On January 17, Russia held an international gas conference in Moscow, inviting the heads of states and governments of all countries buying or transporting Russian gas. The proposal was met with little enthusiasm, but the EU stated that it would attend under the precondition that Ukraine's participation was ensured. Ukraine agreed and was represented by Prime Minister Tymoshenko, who was given full mandate at the talks. The EU was represented by the Czech Minister of Industry and Trade Martin Říman and the EU Energy Commissioner Andris Piebalgs. The two sides also agreed to stop using intermediaries, referring to RosUkrEnergo, a company joint owned by Gazprom and two Ukrainian businessmen. The next day, the head of Gazprom, Alexei Miller, along with the head of Naftogaz, Oleh Dubyna, signed the agreement, and Putin announced that he had ordered Gazprom to start deliveries in full volume and through all necessary routes. Additionally, the claim of a $600 million debt owed to RosUkrEnergo by Naftogaz was dropped. The deal was to remain in force until the end of 2019. On January 20, gas deliveries to both Ukraine and Europe resumed, and within two days, volumes were fully restored. The agreement was altered on November 20, 2009 after a meeting between Tymoshenko and Putin in Yalta; Ukraine would not be fined for buying less gas than what the original agreement stipulated. The change was made due to the Great Recession. ==Impact on Europe==

On January 2, a day after Russia cut off gas supplies to Ukraine, Hungary, Romania and Poland were the first countries to report that pressure in their pipelines had fallen. Bulgaria reported that their supply was also falling and that transit to Turkey, Greece and North Macedonia was affected. Starting on January 7, several countries began to report a significant drop in gas supplies from Russia. Throughout the crisis many countries were unprepared and had been left without supplies for days, leading to significant economic and humanitarian consequences; Bulgaria was forced to stop production in some of its important industrial plants, while one country, Slovakia, declared a state of emergency. The most severely affected countries were in Southeastern Europe, most of which rely completely on Russia for gas and at the time didn't have sufficient alternative energy sources. However North-West Europe wasn't much affected by the cutoff and none of Europe's major markets came close to cutting off customers. Many European countries had made investments since the 2006 crisis which put them in a better position. None of Gazprom's European clients have sued Gazprom for irregularities in gas shipments in January 2009, hence Gazprom suspended its litigation with Naftogaz Ukraine at the Arbitration Institute of the Stockholm Chamber of Commerce over alleged violation of contractual terms on transiting natural gas to Europe by Naftogaz late December 2009. ==Impact on Russia and Ukraine==

Both Russia and Ukraine claimed to have emerged triumphant from the dispute, but both countries sustained major blows to their economies during the Great Recession. Gazprom was estimated to have lost about $1.5 billion in revenues due to lack of sales, while Ukraine lost an estimated $100 million in transit fees and was speculated to have incurred major economic losses due to much of its industry, the backbone of its economy, being temporarily shut down. The president of the European Commission José Manuel Barroso similarly expressed during the crisis that by failing to honor supply agreements Russia and Ukraine could no longer be considered reliable energy partners. Despite calls for European energy diversity being amplified as a result of the crisis, Russia's European customers have long term legal contracts for gas deliveries. Most of these contracts stretch beyond 2025–2030 and obligations to these contracts remain despite the crisis. Thus European countries can do little in the short-medium term in the ways of diversification away from Russian gas, but diversification of delivery routes away from Ukraine could potentially be achieved within a few years via projects such as the South Stream and Nord Stream 1 pipeline systems. ==Technical gas and accusations of stealing==

Gas required to run the compressor stations is known as "fuel gas" worldwide, or "technical" gas in the former Soviet Union. The customary practice is that this gas is provided by the transport/transit company and included in the tariff charged to the shipper (i.e. there is no separate price or tariff charge for this gas). With no contract in place this became a point of contention. According to Heinz Hilbrecht of the European Commission Directorate-General for Transport and Energy, it was Ukraine's responsibility to supply the necessary technical gas, but Naftogaz insisted this was the responsibility of Gazprom. A day after Russia cut off gas flows to Ukraine, Gazprom accused Ukraine of stealing gas. On January 3, Naftogaz issued a statement saying that it would take the necessary gas from volumes that were bound for Europe as technical gas, at a rate of 23 mmcm (million cubic meters) a day. It argued that this was the amount specified in the last transit contract signed in 2002, which covered 2003–2013. However a Gazprom spokesman defined taking technical gas from Russian volumes as stealing, and announced that Gazprom would take the matter to international arbitration court in Stockholm; in a press release on January 4 he claimed that 50 mmcm of gas had already been stolen this way. On January 15, Prime Minister Putin in collaboration with Paolo Scaroni, CEO of Italian energy company Eni, made a proposal to create a consortium of European utilities that would temporarily solve the crisis by financing the supply of technical gas needed to ensure transit to Europe, but this idea was dismissed as gas supplies were restored shortly thereafter. On March 30, 2010 a Stockholm Arbitration Tribunal ordered Naftogas to pay RosUkrEnergo around $200 million as a penalty for various breaches of supply, transit and storage contracts. On April 26, 2011 former Ukrainian prime minister Yulia Tymoshenko sued Dmytro Firtash and RosUkrEnergo in a U.S. District Court in Manhattan accusing them of "defrauding Ukraine's citizenry by manipulating an arbitration court ruling, "undermining the rule of law in Ukraine" in connection with the 2010 international arbitration court ruling in Stockholm. ==Alleged political motives==

and Viktor Yushchenko (February 12, 2008) During the dispute, several theories about alleged political motives behind the conflict surfaced, while both countries accused each other of political blackmail. The Times published an article alleging that the key aim of the Kremlin was to stifle the continued expansion of the EU and NATO into Eastern Europe by exposing Ukraine as an unreliable ally. This view was shared by Vladimir Milov, president of the Institute of Energy Policy in Moscow and former deputy energy minister of Russia, who also claimed that Russia was putting pressure on the Ukrainian government for pursuing pro-western goals. The US Ambassador to NATO, Kurt Volker, stated that although it was a commercial dispute, he believed that Russia was using the event to gain political leverage. Contrarily, the Oxford Institute for Energy Studies concluded in a report: "We do not believe that the often-cited desire of the Russian government to use energy as an economic or political ‘weapon' against European countries played any part in this crisis." Gazprom deputy CEO Alexander Medvedev suggested that Ukraine's actions were being orchestrated by the United States. The State Department's spokesman Sean McCormack called the allegation "totally without foundation." On January 14, Prime Minister Tymoshenko said that an agreement with Russia on prices had nearly been achieved, but had been broken up. She laid blame on RosUkrEnergo's part owner, Dmytro Firtash, former fuel and energy minister Yuriy Boyko, and former head of the presidential administration Sergei Levochkin, who had lobbied against the agreement, and suggested that President Yushchenko had been complicit. Shortly after, Boyko countered that Tymoshenko herself had been lobbying in the interests of business owners Igor Bakai and Viktor Medvedchuk. According to Boyko, Tymoshenko had delayed payment of Ukraine's debts in order to arrange for a company owned by Medvedchuk and Bakai to export large volumes of Russian gas. ==Public relations efforts==

During the conflict both sides tried to win sympathy for their arguments. According to Reuters analyst Sabina Zawadzki, Gazprom had become more skilled at fighting a PR war since the previous pricing dispute with Ukraine in 2006. Since that dispute, the Kremlin hired one of the world's largest public affairs firms, Omnicom, and its Brussels unit, Gplus Europe as well New York units, Ketchum Inc. and Stromberg Consulting. According to Tammy Lynch, Senior Research Fellow at Boston University's Institute for the Study of Conflict, Ideology and Policy, one of the PR problems for Ukraine was that most Western media is based in Moscow and maintains regular contact with political and business elites there; Ukraine's interests, even in a dispute like this, are peripheral to the 'big issue' of Russia's relations with Europe. == Public reaction in Ukraine ==

Another political pressure to Ukraine during the gas conflict, and the fact overlap of gas supplies from Russia, led to the renewal of the civil campaign "Remember the gas - do not buy Russian goods!" on January 1, 2009. In January 2009, variety of different movements carried out the campaigns against Russian policy toward Ukraine, particularly using calls to boycott Russian goods. ==Aftermath (Tymoshenko conviction)==

In April 2011, a criminal case against former Ukrainian prime minister Yulia Tymoshenko was brought in connection with alleged abuse of power during the dispute. Tymoshenko was sentenced to seven years in prison by a Ukrainian court in October 2011. Tymoshenko has labelled the case as "absurd" Russian officials immediately feared Ukraine would use Tymoshenko's conviction to force a revision of the 2009 natural gas treaty she brokered with Putin to end the 2009 gas dispute; this suggestion was dismissed by Ukrainian prime minister Mykola Azarov the next day. ==See also==