Ukraine’s state-owned oil and gas company Naftogaz could add another $5 billion to its existing $30.3 billion demand for compensation from Russia’s Gazprom, Naftogaz’s chief commercial officer Yuriy Vitrenko has said.
The extra $5 billion would be added to the current $12.3 billion claim for underpayment of transit fees by Russia from 2009 to 2016. The Ukrainian company made its initial demand three years ago when it filed a lawsuit against Gazprom to the the Stockholm arbitration tribunal.
Naftogaz demanded compensation for losses caused by disadvantageous terms of 2009 gas contract, which led to Ukraine overpaying for gas supplies and being underpaid for transit services.
A decision on increasing the claim is to be made by December, Vitrenko said in an interview with Ukrainian television’s Channel 5 on Aug. 7.
Russia has long used the transit of its gas through the Ukrainian gas pipeline network as a lever of influence on Kyiv.
A week ago, media reported that Gazprom had decreased the volume of gas transited through Ukraine and increased the load on OPAL, one of two pipelines in Germany connected to the Nord Stream pipeline, Russian newspaper Vedomosti wrote on Aug. 2.
However, Russian officials said that the construction of Nord Stream II pipeline, which would bring more Russian gas to Europe, bypassing Ukraine and the Baltic states, doesn’t imply the termination of existing gas transit contracts between Ukraine and Russia.
“The retention of Russian gas transit through Ukraine will be possible if the country offers competitive tariffs and eliminates known transit risks, including the withdrawal of absurd lawsuits against Gazprom,” Interfax-Ukraine reported the deputy director of Russian Foreign Ministry’s press service, Anastasia Fyodorova, as saying.
Naftogaz’s Vitrenko added that if Gazprom decides to completely stop the transit of gas through Ukrainian territory, Ukraine’s gas pipelines could still be used to export Ukrainian-extracted gas to Europe.
He also said that Naftogaz had increased its capital investment in the Ukrainian gas pipeline network by 2.5 times, and can guarantee reliable transit.
In the 2009 contract between Naftogaz and Gazprom, the companies agreed that Russia would annually supply at least 52 billion cubic meters of gas to Ukraine, as well as use Ukraine as a transit corridor to sell Russian gas to Europe.
But when Russia launched its war on Ukraine in 2014, commercial disputes over the contract’s terms and prices became a political issue. Both state companies then filed lawsuits at the Stockholm arbitration tribunal.
According to the 2009 contract, the cost of Russian was pegged to the average price of oil, while the price for transit was fixed for 10 years, with 20 percent discount in 2009.
As a result, when oil prices were high from 2011 to 2015, Russian gas was more expensive for Ukrainian customers than for those in Europe. In its claim, Ukraine demanded $30.3 billion in compensation: $18 billion for the price discrepancy and $12.3 billion in underpayment for transit.
In turn, Gazprom demanded $47.1 billion in penalties from Ukraine.
Summary of claims of Naftogaz and Gazprom at the Arbitration Institute of the Stockholm Chamber of Commerce (SCC) as of May 29, 2017. Image source: Naftogaz Group. (http://www.naftogaz.com)
On May 31, the Stockholm arbitration tribunal ruled in favour of Naftogaz and rejected Gazprom’s claim to apply “take-or-pay” clause, which stipulated Naftogaz had to pay $34.5 billion for having purchased a smaller amount of gas in 2012-2016 than had been agreed in the contract terms.
Gazprom, which plans to appeal, called the decision “intermediate.”
