What does Stockholm Arbitration decision on gas contract mean for Ukraine ?

Author : Vadym Bodayev

Source : 112 Ukraine

The decision received in Stockholm gives Ukraine a bonus in the investment attractiveness
11:01, 2 June 2017

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Unequivocally, the decision of Stockholm Arbitration for Ukraine is a kind of "reparation;" Ukraine has got the opportunity to ensure its own energy security. Any negotiations between Naftogaz and Gazprom would now take place on an equal footing, not on the bondage terms, like before. We still remember what the Russians said: "Do you think that someone will cancel something there? We have written the points in the contract, and you have signed it, so you should fulfill them."

Related: Decision of Stockholm tribunal allows Naftogaz to demand gas price reduction, — Poroshenko

But the situation turned out in a different way. Clearly, this was not a market contract, it was signed under pressure. If we recall the conditions, there were attempts to cut off gas and intimidate us with the rabid prices. By the way, they were also canceled. Now it is clear that the price should be determined by the negotiations, and prices in Europe should be taken into account when concluding the contract.

Those conditions, included in the disputed in Stockholm treaty, were indeed enslaving both at prices and conditions. Actually, this formula "take or pay" is absolutely bonded one. But, of course, when the contract was based on the realities of the time, it was impossible to conclude it on the other terms.

Related: Russia illegally extracts three billion cubic meters of Ukrainian gas in Crimea

Of course, it should be noted that the decisions taken in Stockholm are working only with regard to the agreements, concluded since 2014. Therefore, the financial obligations that we had between 2011 and 2014, do not fall under this decision. And, most likely, for this period, we would fulfill our financial obligations to Russia, strictly under the contract, which operated at that time. In terms of those conditions, amount of debts is not critical. Ukraine can pay them off. This amount reaches some billion.

But the main thing is that the decision of the Stockholm Arbitration opens up entirely new opportunities for us. In particular, these are opportunities with transit conditions. Now we have the right to export purchased gas, we can go to the system when we buy gas for the European consumer. That is, the European consumer, can buy gas not on the western border, but on the eastern one. And he can buy it from us, from Ukraine.

Related: Ukrainian gas hub: What does memorandum on Ukrainian gas transporting system mean?

The only problem here is that the attitude of the European consumer to the reliability of Ukraine as a partner is greatly undermined, because the Russians invested a lot of money in this. And they say that if you buy gas from the eastern territory, and Ukraine has some delivery problems, we cannot personally guarantee that you will get your order. And if you buy it directly from us, on the western border, you would exclude all the risks.

It is important that Ukraine has the opportunity to re-enter all these things after the contract is over. Of course, the current contract cannot be completely revised. It would operate until 2019. But after the expiry of the validity period, we (taking into account the decision of the Stockholm Arbitration) have the opportunity to conclude it on new, more favorable conditions. The decision of the Stockholm arbitration gives us the opportunity to bargain with Gazprom. We will be able to build regular market relationships and interactions.

Related: Prepayment for gas supplies cancelled, - National Energy Regulation Committee

I should note that several years ago, many European companies have challenged the enslaving conditions, imposed by Gazprom. And due to the fact that there were precedents of such court decisions on the contracts with the European companies, we have got the opportunity to obtain the arbitration award. But, of course, this solution means for Europe preferential terms for itself as well: for European companies it would be easier to negotiate with Gazprom on the price and terms of contracts in the future.

Related: Lukashenko threatens Russia with retaliatory measures after increasing gas price

It should be said that the decision received in Stockholm gives Ukraine a bonus in the investment attractiveness. We really have an opportunity to ensure the country's energy security on the basis of this decision.

But Gazprom, of course, has lost in the eyes of the investors, and I think we will soon see it by the fall of its quotes. They were sure of their victory and believed that the number of billions they are counting on is already in their pocket.

Related: Gazprom admits gas price increase to Europe by 10%

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