Naftogaz, the Ukrainian national energy company, will balance on the edge of defaulting on payments to Russia in 2010, according to the Ukrainian president's energy envoy.

"Regrettably, there is the threat of a default," Bohdan Sokolovskiy warned, and he urged the Ukrainian government to review its gas contracts with Russia.

Sokolovskiy said that Naftogaz would have to pay around USD 10 B for Russian natural gas supplies in 2010, while the Ukrainian energy company's budget deficit this year was expected to be USD 4 B, even despite reduced gas imports from Russia.

At the same time, the president's energy aide said, Ukraine was receiving too little for Russian natural gas transit to Europe, with receipts in 2010 estimated at USD 3,2 B, of which almost USD 2 B would be spent on purchasing technological gas to provide for gas transit.

On December 31, the International Monetary Fund (IMF) had allowed the Ukrainian government to spend USD 2 B from the National Bank's gold and foreign exchange reserves, to pay for Russian gas deliveries for the final month of the year.

Russia, which supplies around one quarter of Europe's gas, had shut down supplies via Ukraine's pipeline system at the start of 2009 during a dispute over unpaid bills and new prices. Disruption in Europe was widespread, particularly in Bulgaria, which is almost totally reliant on Russian gas supplies.

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