Arrest of Ukrainian assets of Gazprom: What does it mean?

Author : Olena Holubeva

Source : 112 Ukraine

After the decision of the Stockholm arbitration on the transit contract, the war between Naftogaz of Ukraine and Gazprom has spilled into a hot stage
11:46, 12 March 2018

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112 Agency

After the decision of the Stockholm arbitration on the transit contract, the war between Ukrainian Naftogaz and Gazprom has turned into a hot topic. Naftogaz has won compensation in the amount of $4.63 billion for Gazprom’s delivery shortages. Thus, Gazprom eventually had to pay $2.56 billion in favor of Naftogaz. Daily percent of the debt is $526 thousand (starting from March 1). President Petro Poroshenko has already called on Naftogaz to procure an arrest of Gazprom's assets in the event that the Russian gas monopolist refuses to fulfill the financial obligations. The company has assured that it uses instruments of enforcement for Gazprom's assets in Europe and the United States.

Related: Ukraine can reduce gas consumption by 5 billion cubic meters, - PM

March 7, it became known that the arrest campaign in Ukraine has begun. However, not within Stockholm Arbitration decision, but to recover the fine imposed on Gazprom in January 2016 (by the Antimonopoly Committee and confirmed by the decisions of the Ukrainian courts). Prime Minister Groysman has reminded that the fine was imposed on Gazprom for abuse of monopoly position and initially amounted to $3.3 billion. In connection with penalties, the amount has increased. According to the prime minister, it amounted up to $6.3 billion.

"Ukraine's position in the current situation with Gazprom should be tough and consistent. Today we had a talk with Minister of Justice Pavlo Petrenko concerning our steps. We have agreed that the State Executive Service is now intensifying its actions with respect to the recovery of a fine from the Russian gas monopolist Gazprom violation of the Ukrainian monopoly legislation," Groysman wrote. He noted that the inventory and seizure of Ukrainian assets of Gazprom were started after the relevant court decision. "Now we will act more harshly," the Prime Minister promised.

Related: Ukraine-Russia gas conflict not to impede Nord Stream II implementation, - official

The Cabinet of Ministers said that the property of the companies Gazpromzbut Ukraine (code 35829646), the International Consortium for the Management and Development of the Ukrainian Gas Transmission System (code 32349152), the securities of "INSTITUTE YUZHNIIGIPROGAZ" (code 00158741), as well as JSC Gaztranzyt.

Gaztranzyt is the most interesting asset. This company owns a new compressor station (CS), which was recently built. Through it, gas is transported to Romania, Bulgaria, Turkey," explained ExPro Ukraine director Gennady Kobal.

The company operates the "Tarutyno" compressor station and the loping of the Ananyev-Tiraspol-Izmail main gas pipeline. Ukrtransgaz (part of Naftogaz of Ukraine) serves as an operator for maintenance of the company's facilities. Direct functions for the operation and maintenance of the Gaztranzyt facilities are carried out by the Odesa Linear Production Department of the main gas pipelines. The structure of the company includes an office in Kyiv, a compressor station "Tarutyno" (Tarutyno district, Odesa region), a service to control the linear part of the pipeline (Ananyev district of the Odesa region), a service to control the operation of the linear part of the gas pipeline in Reni district of Odesa region), and the town of the service staff of the "Tarutyno" compressor station.

According to Kommersant, the company's net profit in 2015 was $22.8 million, net income - $28.3 million.

Related: Germany expects Ukraine, Russia to be reliable gas suppliers

According to the press service of the Cabinet, "Ukrainian expert group" estimated the value of shares of Gaztranzyt in $23.3 million.

Shares should be sold at open auctions, Prime Minister Groysman said. It is noteworthy that only Gazprom's stake - 40.2% - could be auctioned. It was arrested. Another 40.2% of Gaztranzyt is owned by Naftogaz of Ukraine, and 19.6% by Turkish company Turusgaz.

Gennady Kobal states there is no time to hesitate with the sale of the shares. According to him, the direction that Gaztranzit is quite actual, but in three or four years it could be replaced by currently constructing Turkish Stream and the pipeline that is joining Greece and Azerbaijan. "We should not forget that Romania is increasing its own gas production," the expert said.

Other assets from the list promulgated by the government are of little interest, experts say. In particular, Gazpromzbut - a 100% subsidiary of Gazprom, which was created to supply Russian gas - does not conduct business in Ukraine (Ukraine has not been importing Russian gas since 2015) and does not have the special infrastructure. "Until recently, they had an office in the Arena" (Kyiv, - Ed.)," Kobal noted.

Related: Gazprom appeals against Stockholm arbitray court's decision on gas supply

Gazpromzbut was established on April 3, 2008, to work on the Ukrainian market to follow the Agreement on the regulation of relations in the gas sector between Ukraine and Russia. It was reported that in 2008, the company has monthly sold more than 1 billion cubic meters of gas to consumers. Its customers were the leading industrial enterprises, in particular, the Mariupol Iron and Steel Plant named after Ilyich, Azovstal, Northern and Central mining and processing combines Eurocement Group. In 2010, the company was named the second largest gas supplier in Ukraine after Naftogaz.  

The You Control disclosure system says that on January 29, 2018, executive proceedings against Gazpromzbut were opened.

The International Consortium for the Management and Development of the State Customs Service of Ukraine (authorized capital of 6.8 million USD) was established in October 2002, on an equal footing by Naftogaz and Gazprom in pursuance of an agreement between the Cabinet of Ministers and the Government of the Russian Federation on strategic cooperation in the gas sphere. The consortium was the customer of the construction of the Bogorodchany-Uzhgorod gas pipeline with a design capacity of 19 billion cubic meters of gas per year and a length of about 300 km. It was never built: Viktor Yushchenko, who came to the presidency, tore up the agreements signed earlier by Prime Minister Viktor Yanukovych.

Related: Energy and Coal Industry Ministry announces end of gas crisis in Ukraine

The consortium has gained its importance again with the election of Yanukovych as President. In 2011, the director of the enterprise Gazprom Sales Ukraine Anatoly Podmyshalsky said that Naftogaz and Gazprom at the meeting of the consortium members jointly decided to come up with an initiative to amend some laws that would allow participation in the management of the CTA to foreign countries, including Russia.

"INSTITUTE YUZHNIIGIPROGAZ" PJSC is a branch of the design institute, located in Rostov-on-Don. Like the parent facility, it specializes in engineering research, geology, geodesy, and technical advice. According to You Control, Gazprom owns only 40% of the institute; the rest belongs to the private individuals. But the most interesting thing is that the Ukrainian branch of the Institute is located on Artem Street, 169-G, in occupied Donetsk. How can the arrests of its securities on the controlled by Ukraine territory influence the situation? And how to sell those assets to turn loud statements into the real money? There are no answers yet.


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