Ukraine has stated its willingness to settle the $1.5 billion natural gas bill it incurred with the Russian major Gazprom, provided it can have a direct gas import contract with it. The outstanding bill was the latest bone of contention between the two countries as Gazprom threatened to cut off supplies to Ukraine if Naftogas - the Ukrainian Gas Company, did not pay the debt.

The direct export agreement would help Ukraine to remove intermediaries such as RosUkrEnergo, which was a commodity trader registered in Switzerland and partly owned by Gazprom. The Ukrainians allege that the operations of these intermediaries were opaque and vulnerable to corruption and that they also increase the import price of natural gas. The Central Asian Republics were not able to supply gas to Ukraine due to a rise in internal demand caused by a particularly cold winter. To make up for the shortfall, Ukraine accepted the additional gas supply offer made by Gazprom. Ukraine had agreed to pay on a monthly basis, but the payments have not been made so far1.

• 1. “Ukraine sets conditions for paying natural gas bill,” International Herald Tribune, February 11, 2008, at www.iht.com/articles/2008/02/11/business/11gazprom.php