Russian Gazprom to end Ukraine’s gas transit, supply contracts

Russia’s Gazprom has started the procedure to terminate its supply and gas contracts with Ukraine’s Naftogaz a year ahead of their expiry after disagreement over a Stockholm arbitration verdict in a four-year dispute with Naftogaz, Gazprom said on Friday.

The announcement follows a decision by Gazprom on Thursday not to supply pre-paid gas to Naftogaz as agreed under the terms of the Stockholm court’s verdict.

“The Stockholm arbitration, following the double standards, has taken [an] asymmetrical decision regarding the supply and transit contract with Naftogaz Ukraine. Thus the arbitration has significantly damaged the balance of interest of the parties under these contracts,” Gazprom said.

On Wednesday, the Stockholm arbitration tribunal ordered Gazprom to pay Naftogaz damages of $4.63bn for undelivered gas of which Gazprom will be required to make a net payment of $2.56bn to Naftogaz.

Gazprom disagreed with the award, noting that the decision was ‘imbalanced’.

Gazprom said that last December, the Stockholm tribunal accepted in a separate dispute over Russian supplies to Ukraine that the volumes offtaken by Naftogaz should be reduced to take in consideration the decline in domestic demand.

However, Gazprom said, when deciding in the latest transit dispute, the tribunal disregarded its claims that transit volumes to Europe via Ukraine should also be reduced because of falling EU demand.

“The arbiters have grounded their decision by the rapid decline of the Ukraine economy. We are definitely against solving the problems of Ukrainian economy on our expense. Under such a situation, the continuation of contracts for Gazprom is economically unreasonable and not beneficial” Gazprom said.

“Gazprom is forced to immediately initiate the procedure of termination for gas supply and transit contracts with Naftogas in the Stockholm arbitration”, said Alexey Miller, chairman of Gazprom’s mnagement committee. aura.sabadus@icis.com