Kiev , Ukraine ( CNN ) -- Early this year Ukraine -- along with much of eastern Europe -- was caught in a deep and protracted cold snap . Many froze to death , energy demand spiked , and to top it all Russia accused Ukraine of stealing gas from transit pipes destined for western Europe for the second time in three years . Ukraine issued a firm denial , adding another blot to the two nations ' fraught -- but highly dependent -- relationship . The fact remains that Ukraine needs Russian gas while Russia needs Ukraine 's transit pipeline to export west . The spat came on the heels of a disastrous relationship meltdown in 2009 , when for two nerve-wracking weeks Russia abruptly stopped pumping gas to Ukraine and Europe . The Russian energy giant Gazprom claimed Ukraine 's gas company -- Naftogaz Ukrainy -- owed it huge sums of money in missed payments and fines . However , Naftogaz countered that it had paid the bill and claimed that Gazprom was in fact trying to force it to accept a new price for gas which it could ill afford . They eventually reached a deal , but Ukraine 's Prime Minister Mykola Azarov still maintains that the terms are unfair : . `` Americans pay $ 70 for 1000 cubic meters of gas when Ukraine pays $ 550 to Russia for the same amount . It means almost ten times more . Tell me what kind of economy can take this ? '' He told CNN . However , America benefits from its own vast reserves of natural gas , and Russia argues that still Ukraine gets it for less than consumers in Poland , Hungary , Turkey and Romania . So , while Ukraine tries to negotiate a better deal with Russia , it 's also working to break its dependency on Russian gas and diversify its sources of energy . A key part of the plan is to import liquid natural gas from other countries -- such as Azerbaijan -- which will be processed at a terminal built near the vast port of Odessa on the Black Sea . The head of the project , Vitaly Demyanin , says that by 2018 it should have replaced 30 % of existing Russian gas imports . `` It will have 10 billion cubic meters of alternative gas . It will help us to negotiate with our main supplier , '' he said . At the same time Yury Boiko , the Ukrainian energy minister , has high hopes that shale gas -- formed deep underground within large shale rock formations -- could also be a major alternative source of power in the decades to come . He told CNN that shale gas exploration in western Ukraine has `` very large potential . '' But it 's not just alternative gas supplies that the energy-hungry nation of 44.8 million residents has in its sights . The government has pledged to invest heavily in green energy . However , this wo n't do much to bolster their eco-credentials , as they are also planning to burn a great deal more coal too . It 's all testament to their increasing desire to generate power without recourse to gas . Meanwhile , as Ukraine looks for other energy supplies , Russia is looking for other ways to get its gas to Europe . Russia is the world 's biggest producer of natural gas and supplies Europe with nearly 40 % of its imports , according to the European Commission . It has already built one pipeline that bypasses Ukraine . The 765-mile long `` Nord Stream '' pipeline -- costing more than $ 12 billion -- directly links Russia with the European Union via the Baltic Sea bed . At its launch in 2011 , the then Russian Prime Minister , now President , Vladimir Putin , made an ominous and thinly-veiled reference to his Ukrainian neighbors . `` Any transit country has always the temptation to take advantage of its transit status , '' he said . `` That exclusivity is now disappearing . '' At the end of this year , Russia plans to begin construction on another gas pipe to Europe -- the `` South Stream '' -- running through the Black Sea to Bulgaria and on to Greece , Italy and Austria . The projects threaten to strip Ukraine of billions in revenue and any remaining leverage it might have over future gas prices . But in an effort to salvage long-term relations , Ukraine is now proposing a new model that would allow themselves , Europe and Russia equal control of their transit system . `` So the consumers , the sellers , the supply and transit country is together . It 's a good model and it 's convenient for everybody , '' says energy minister Boiko . Only time will tell if these major energy reforms will change Russia 's position in future negotiations and transform the horizon of Ukraine 's economic future .
Ukraine and Russia have long-standing feud over gas supply lines . Ukraine is big importer of Russian gas , while Russia depends on Ukraine pipeline . In recent years , Ukraine has tried to diversify its energy supply to reduce dependence . Liquid gas imports , underground shale gas and green energy are among new sources .