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Gazprom To Halt Cooperation With Ukraine’s Naftogaz

By Vusala Abbasova March 9, 2018

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As a result of a three-year legal dispute between Gazprom and Naftogaz, on February 28 Stockholm Arbitration ordered Ukrainian national holding to pay Gazprom $2 billion and ruled that it pay $4.673 billion in compensation to Naftogaz for insufficient transit during the period between 2009 and 2017.

Russia’s energy giant Gazprom has sent official notification to the Ukrainian gas company Naftogaz about its intention to tear up contracts for gas deliveries and gas transit.

“The arbitrators justified their decision by the sharp deterioration in the Ukrainian economy. We are categorically against Ukraine's economic problems being solved at our expense,” said Head of Gazprom Alexei Miller.

As a result of a three-year legal dispute between Gazprom and Naftogaz, on February 28 Stockholm Arbitration ordered Ukrainian national holding to pay Gazprom $2 billion and ruled that it pay $4.673 billion in compensation to Naftogaz for insufficient transit during the period between 2009 and 2017. In addition, Stockholm corrected the volumes of gas that Ukraine is obliged to purchase.

Gazprom announced its disagreement with the decision by the arbitration body. The Russian company believes that the Stockholm Arbitration was guided by double standards, while its decision violated the interests of the parties. Gazprom would defend its rights by all means in line with applicable legislation, according to a statement of the Russian gas holding, referring to TASS.

In turn, Naftogaz’s head of Business Development department Yuri Vitrenko said it did not see any grounds for terminating the transit contract.

Ukraine has been forced to purchase gas from Europe at a price four times higher due to cancelled contracts with Gazprom, head of Business Development department at Naftogaz Yuri Vitrenko said earlier, adding that he assumes that the Russian side should compensate for losses.

Gazprom and Naftogaz signed a contract for the supply of gas to Ukraine in January 2009 and it is valid until December 31, 2019. Under the contract, the volume of supplies was to be 40 bcm of gas in 2009, and 52 bcm, starting from 2010. However since 2012, Naftogaz failed to fully intake the contracted volume. Since November 2015, Kiev has bought no Russian gas, replacing it with reverse gas from Europe.

According to the Deputy Minister of Foreign Affairs of Ukraine for European Integration Olena Zerkal, the new arbitration proceedings will last at least until the end of the existing contract between Gazprom and Naftogaz.

Zerkal said Russia took Gazprom's loss in the Stockholm Arbitration as a slap in the face by the state of Ukraine.

The reaction is also provoked by the fact that Russia's presidential elections are to be held on March 18, and the energy monopoly's failure in court personally affected President Vladimir Putin, Zerkal told a TV panel show on ICTV March 5.

Read more: Gazprom, Ukraine, Russia, gas