Naftogaz of Ukraine, the state oil and gas company, revealed on Jan. 18 through its CEO, Andriy Kobolyev, that it lost a total of $32 billion from 2009 to 2017.
And it would have been more, Kobolyev assures, had the Arbitration Institute of the Stockholm Chamber of Commerce not ruled in favor of Naftogaz on Feb. 28, 2018, and ordered the giant, state-owned Russian gas company Gazprom to pay $2.56 billion to the Ukrainian energy company, with an additional $500,000 reduction in the price of gas supplies for 2018 and 2019.
“Jan. 19 will be the 10th anniversary of the signing of gas delivery and transit contracts between Naftogaz Ukraine and Gazprom,” a Naftogaz press statement reads. “These contracts reflected the political agreements between the government leaders of that time of Ukraine and Russia, (then Prime Minister) Yulia Tymoshenko and Vladimir Putin.”
Even though the financial gains following the court case pale in comparison to the losses suffered over the eight-year period, the situation could have been much worse had Naftogaz lost the case. Kobolyev said that if Gazprom had won, Naftogaz would have owed an additional $94.7 billion to the Russian company.
Despite the legal conflicts, Naftogaz remains hopeful that Gazprom will continue to transit its gas through Ukraine for delivery to Europe, and therefore a new contract will be signed before the current one expires on Dec. 31.
Russian gas transit fees bring Ukraine approximately $2 billion a year – an important contribution to balancing the country’s books.
According to the European Commission, 44 percent of the Russian gas delivered to Europe in 2017 transited through Ukraine, which makes it the main transiting route, followed by the Nord Stream pipeline (30 percent), and Belarus (24 percent).
However, with the expected completion of the Nord Stream 2 and Turkstream pipelines – both of which will bypass Ukraine – and with the tense relations between the two neighboring countries since Russia invaded Crimea and launched a war in eastern Ukraine, it seem unlikely that Moscow will be willing to cooperate with Kyiv.
Moreover, Gazprom appears to be trying to delay any renegotiation with Naftogaz. The increasing demand for natural gas in Europe could ultimately force the European Commission to conclude whatever deal with Russia that would guarantee sufficient supplies, even if Ukraine lost out from it.
