Here's what the Gazprom halt could mean for Ukraine:
* Ukraine has plenty of stored gas
. Naftohaz says it has 17 billion cubic meters (bcm) in storage, 22 percent of Ukraine's annual consumption; it says intermediary RosUkrEnergo has a further 11 bcm.
* Higher gas prices would be negative for current account
, closely watched by investors after the hryvnia suffered steep falls in the recent months against major currencies. Higher gas prices would add pressure on the hryvnia.
* A gas price hike could hit the profits of major industries
, although Ukraine actually needs less gas now as the economic crisis has reduced industrial energy consumption by 25 percent. Many of the country's biggest metals producers -- the drivers of Ukraine's economy -- use coal instead of gas.
* Price hikes would strain Naftohaz finances
even more in a year in which it has to repay a $500 million Eurobond. The company avoided technical default on the bond in late December when it published its 2007 audited accounts -- a condition of the bond. Default would lead to far more expensive foreign debt for Ukrainian companies and the state.
* Higher gas prices will eventually feed through to Ukrainian households
, who are already facing rising unemployment and lower wages, though prices are subsidized heavily by the government.
* Politicians may have to take unpopular
decisions, such as raising gas bills, as they gear up for a presidential election in 12 months. Yushchenko and Prime Minister Yulia Tymoshenko, at loggerheads for months, are expected to stand.
* Relations with Russia could dominate the political agenda
and deflect attention away from dealing with the economic crisis. -- Reuters