Soon af­ter Naftogaz wins, Rus­sia quickly re­tal­i­ates

Kyiv Post - - Business - BY BERMET TALANT [email protected]

Ukraine and Rus­sia are on the brink of a new gas dis­pute.

A day af­ter the Stock­holm ar­bi­tra­tion court ruled Rus­sia’s Gazprom to pay Ukraine’s state-owned oil and gas mo­nop­oly Naftogaz $2.56 bil­lion in com­pen­sa­tion in the fi­nal stage of a four-year le­gal bat­tle, Gazprom de­cided not to restart gas sup­plies to Ukraine forc­ing the coun­try to cut us­age in sub-freez­ing tem­per­a­tures.

Late on Feb. 28, Naftogaz re­ported that it had won a $4.63 bil­lion claim against Gazprom for its fail­ure to de­liver agreed tran­sit gas vol­umes be­tween 2009 and 2017.

Since the same court ear­lier or­dered Naftogaz to pay Gazprom over $2 bil­lion for gas sup­ply, the net pay­ment Gazprom will have to make to Ukraine is $2.56 bil­lion. In ad­di­tion, Naftogaz re­ceived a $500,000 price re­duc­tion for 2018 and 2019.

“We’re happy that we won in ar­bi­tra­tion on the key is­sues. It’s an im­por­tant day for the Ukrainian peo­ple and the fu­ture of the Euro­pean mar­kets,” Naftogaz CEO An­driy Kobolev wrote on Twit­ter.

Naftogaz and Gazprom filed multi-bil­lion dol­lar claims against each other in June 2014 as re­la­tions be­tween two coun­tries wors­ened fol­low­ing Rus­sia’s launch of a war in eastern Ukraine and the start of its mil­i­tary oc­cu­pa­tion the Crimean penin­sula.

Naftogaz de­manded com­pen­sa­tion for losses caused by the dis­ad­van­ta­geous terms of the 2009 gas con­tract, which left Ukraine overpaying for gas sup­plies and be­ing un­der­paid for tran­sit ser­vices. In 2015, Naftogaz stopped buy­ing Rus­sian gas. Then in 2017, Gazprom be­gan con­struc­tion of two pipe­lines to Ger­many and Turkey that by­pass Ukraine and may leave it with­out at least $2 bil­lion in tran­sit fees.

In pre­vi­ous rul­ings, the Stock­holm court ruled in fa­vor of Naftogaz and re­jected Gazprom’s claim to ap­ply a “take-or-pay” clause, which stip­u­lated buy­ers had to pay for gas sup­plies in full, no mat­ter whether they were phys­i­cally de­liv­ered or not.

At the same time, the court obliged Naftogaz to pay Gazprom over $2 bil­lion in debts and to buy 5 bil­lion cu­bic me­ters of gas a year un­til the con­tract ex­pires.

The court, the Ar­bi­tra­tion In­sti­tute of the Stock­holm Cham­ber of Com­merce, does not pub­lish its rul­ings, al­low­ing the dis­put­ing sides dis­close the de­ci­sion.

No change of terms

The Stock­holm court didn’t sat­isfy other de­mands of Naftogaz. One of them was to re­con­sider the terms of the gas tran­sit con­tract in ac­cor­dance with Euro­pean and Ukrainian en­ergy laws. The court noted that “the start of reg­u­la­tory re­form in Ukraine is the mat­ter of Ukrainian au­thor­i­ties and is out of the court’s purview.”

At the mo­ment, Naftogaz is go­ing through an un­bundling process, i.e. trans­fer­ring its gas trans­mis­sion sys­tem to an in­de­pen­dent op­er­a­tor in order to com­ply with the Euro­pean Union’s en­ergy laws — so-called the Third En­ergy Pack­age.

Nor did court sat­isfy Naftogaz’s re­quest to ap­ply for a new pric­ing scheme for tran­sit ser­vices. The ex­ist­ing con­tract has a fixed fee, which Gazprom claims is too high and uses as an ar­gu­ment against trans­port­ing its gas through Ukraine. Cur­rently, Euro­pean im­porters and do­mes­tic pro­duc­ers are charged at en­try and exit points.

“Now it is nec­es­sary to re­vise the tran­sit con­tract, tak­ing into ac­count the tri­bunal’s rul­ing and Euro­pean and Ukrainian leg­is­la­tions,” CEO Kobolev said in a state­ment. “Naftogaz in­tends to pro­pose Gazprom to start ne­go­ti­a­tions in the near fu­ture.”

Naftogaz wants to keep Rus­sian gas tran­sit through Ukrainian ter­ri­tory af­ter the cur­rent con­tract ends in 2019 — the same year the con­struc­tion of the Nord Stream 2 and TurkStream by­pass pipe­lines are ex­pected to be com­pleted.

(Kostyan­tyn Ch­er­nichkin)

Work­ers stand near a gas in­stal­la­tion in Bo­yarka near Kyiv on April 22, 2015.

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