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Gazprom disagrees with Stockholm arbitration ruling in dispute with Naftogaz

The Arbitration Institute of the Stockholm Chamber of Commerce has also rejected a Naftogaz appeal to increase the gas transit tarrifs
Sergei Savostyanov/TASS
Sergei Savostyanov/TASS

MOSCOW, March 1. /TASS/. Russian energy giant Gazprom disagrees with the Stockholm arbitration institution’s ruling, according to which it has to pay $2.56 billion in compensation to Ukraine’s Naftogaz company, the Russian gas holding said in a statement.

"Gazprom expresses its disagreement with this decision by the arbitration institution. Earlier, the same arbiters agreed with Naftogaz’s explanations that the decline in the demand for gas and Naftogaz’s non-compliance with its gas purchase commitments were caused by a slump in the Ukrainian economy. However, the same argument - a decline in gas purchases by European consumers as the main reason for less transit via Ukraine - was not taken into account as far as Gazprom was concerned," the Russian company said in a statement.

Gazprom said it would defend its rights by all means in line with applicable legislation.

The Arbitration Institute of the Stockholm Chamber of Commerce has also rejected a Naftogaz appeal to increase the gas transit tarrifs and make the contract with Gazprom compliant with the Ukrainian law, the Russian gas holding said.

"The arbitration institute has rejected Naftogaz demand to increase tariffs for gas transit and to amend the contract in line with the Ukrainian law. The arbitration institute established that provisions of neither European nor Ukrainian anti-monopoly legislation are applicable to the contract," the Russian company said in a statement.

In 2014, Gazprom and Naftogaz filed lawsuits against each other in the Stockholm Arbitration. Gazprom's demands for Naftogaz amounted to more than $37 billion. Naftogaz wanted Gazprom to pay some $17 billion.

The court has ordered Naftogaz to pay Gazprom $2 billion and awarded a $4.673-billion compensation to Naftogaz by Gazprom on Wednesday. The latest ruling means that Gazprom owes over 2.5 billion to Naftoaz overall.

Gazprom and Naftogaz signed the current contract for the supply of gas to Ukraine in January 2009 and it is valid until December 31, 2019. Under the contract, the volume of supplies was to be 40 billion cubic meters of gas in 2009, and 52 billion cubic meters starting from 2010. However, since 2012, Naftogaz failed to fully intake the contracted volume. Since November 2015, Kiev has bought no Russian gas, replacing it with reverse gas from Europe.

Ukraine sought a retroactive price change, recovery of overpayment for gas and cancellation of the "take or pay" principle. Gazprom demanded that Naftogaz pay arrears for gas that had been supplied earlier, as well as payment on the "take-or-pay" obligation for 2012-2016, and penalties for overdue gas payments.

The Stockholm Arbitration satisfied the requirements of the companies only partially. The court ordered Naftogaz to pay Gazprom $2 bln for the deliveries, but reduced the annual contractual volume of purchases to 5 billion cubic meters.

At the same time, the "take or pay" condition was preserved for 80% of this volume. This condition will be effective only in 2018.

The court also rejected most of Naftohaz's claims to Gazprom which concerned overpayment for gas. Only the price of gas received by the Ukrainian company in the second quarter of 2014 was lowered (from $485 to $352 per 1,000 cubic meters). Naftogaz wanted a retroactive price change starting from May 2011.