Stockholm Syndrome: The risks of "Naftogaz" in trial with "Gazprom"

Author : Ihor Rymskyi

Source : 112 Ukraine

Stockholm is a crucial stage of the trial between Russia’s "Gazprom" and "Naftogaz Ukraine" on the revision of gas contracts in 2009
10:32, 30 September 2016

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After months of preliminary hearings, call of witnesses and a final court decision are still ahead. According to our sources, the final point in this matter could take place in late 2016 - early 2017.

What is the point of the debates?

According to the contract for the supply of gas since 2009, "Naftogaz Ukraine" has to buy a fixed amount of gas, with deviation rate of 10%. In practice, the "Gazprom" turned a blind eye to Ukraine’s violation of this paragraph during the presidency of Viktor Yanukovych. In 2015, the company changed its position and billed Ukrainian oil and gas monopoly with multibillion-dollar bills for gas volumes that have not been used. In particular, the Russian monopoly demanded from "Naftogaz Ukraine" to pay 2,5 billion compensation for the fact that it bought less gas than anticipated by the contract. In addition, Ukraine insists that the court decision must revise the rates for the transit of Russian gas.

Related: Naftogaz Ukraine: Russia tries to hurt Ukraine’s economy by building Nord Stream II

"Naftogaz" chairman Andlriy Kobolyev said he expects to decide in the Stockholm court the questions about payments for "Gazprom’s" gas supplies to the occupied part of the Donetsk and Luhansk regions. The Russian monopolist in turn insists that Ukraine should pay for these supplies.

Related: Ukraine’s Naftogaz company demands USD 26,6 bln from Russian Gazprom

Expectations of "Naftogaz" and "Gazprom." Probable end of the dispute

Our sources in the Cabinet feel optimistic about the outcome of the process. "We hope to receive compensation in connection with the fact that the caloric quality of the delivered gas was lower than under contract, and also because of gas overrun fault of the Russian side," underline the sources.

Related: Russia’s ‘Gazprom’ receives letter from Ukraine’s ‘Naftogaz’ asking to resume gas supply

They explained that "Naftogaz" had to burn additional gas volumes for transit Russian gas to European consumers, in particular due to lower Russian side pressure in the transit tube this summer.

In addition, "Naftogaz" expects a positive judgment on the contract for gas transit.

"We hope that the court will support us and support the increase in transit tariffs for "Gazprom" to the European level," the sources add. Recall that in late December 2015 National Commission on the regulation of the electricity market has increased the transit of gas to "Gazprom" for 25-35%.

Related: General Prosecutor's Office began investigation of negligence of "Naftogaz Ukraine" senior management

As for the point of contract "take or pay," the Cabinet suggests that the Court may oblige "Naftogaz" to pay "Gazprom" a million dollars compensation for not following the contract.  In addition, "Naftogaz" will be able to compensate the potential loss if it can convince the court to oblige "Gazprom" to make a similar commitments in transit contract. "Transport or pay" –  Russian monopolist would pay money for a certain amount of transportation, even if the actual supply would be less than specified one in the contract.

Related: Naftogas: Ukraine may get 50 billion USD from Gazprom by the decision of arbitrage

The end of this dispute is expected to be put at the beginning of the next year.



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