Just as soon as Gazprom and Naftogaz of Ukraine had wrapped up a four-year long litigation battle in the Stockholm Arbitration Court, the two gas companies are now entering into a new legal conflict on satisfying the judgement. Subsequently, Naftogaz announced that the process of enforcing the recovery (of $2.6 bln) would begin against Gazprom in European countries within the framework of the arbitration proceedings enforcement, which stipulates freezing the company’s property in Europe, particularly the shares of Nord Stream AG and Nord Stream 2 AG. Gazprom stated that it is aware of Naftogaz’s intention to take action, but it had not received any formal notices. A Nord Stream 2 AG representative told Kommersant that the company had received notification about the recovery enforcement procedure in May, adding that it is not going to affect the gas pipeline’s construction.
The recovery enforcement measures deprive Gazprom of the possibility to dispose of its shares in those companies, Managing Partner at the Law and Business asset managing company Alexander Pakhomov told the newspaper. He does not expect the accounts of the two firms to be frozen, and their operations, including the construction of the Nord Stream 2 natural gas pipeline to be hindered. Neither does he expect the affected property to be appropriated by Naftogaz. Sources in Gazprom told Kommersant that the company would challenge the recovery measures, as well as any further action taken by the Ukrainian gas company. Pakhomov expects it to be a long process that "might last for years, until either the Arbitration’s decision is revised or abandoned, or Gazprom fulfills it, or the sides reach a compromise." The paper’s sources also suggest that Naftogaz would try to freeze the shares of South Stream Transport B.V., a Netherlands-registered project company for construction of the sea part of the Turkish Stream pipeline.
According to Stanislav Mitrakhovich, a leading expert at the National Energy Security Fund, Naftogaz has chances to make Gazprom pay out over $2 bln. "It is realistic after Gazprom undergoes the procedure of challenging the Stockholm Arbitration judgement. The Russian company will pay, but using money and in a civilized manner, not through exemption of assets such as Nord Stream 2," he told Nezavisimaya Gazeta. Sergey Khestanov, an associate professor with the Russian Presidential Academy of National Economy and Public Administration, agrees that the Ukrainian company might pursue payment. "The experience shows that in such cases it is rather difficult to get money even with a court judgement in hand. But on the other hand, Yukos shareholders managed to receive a solid sum of money in their litigation against Russia in those cases when they had a court verdict," he told the paper.
The situation around Russian journalist Arkady Babchenko whose faked murder had been staged by Ukraine’s security services, will be used for propaganda purposes in Moscow and Kiev, RBC says. This stunt by the SBU may be considered an unprecedented case in the contemporary history of foreign relations, Head of the Foreign Policy Agency and Program Director at the Valdai Club Andrey Sushentsov told the publication, adding though that such incitement usually triggers a good news cycle for a week, but hurts the credibility of the country that stages such stunts. After such provocations, Ukraine’s credibility may well hit rock bottom. In addition, since the media wasted so much attention on the story about the staged murder, it now will be eyeing news from that country with a double dose of skepticism, the expert noted.
Kiev police reported on Tuesday evening about a fatal attack on Russian journalist Arkady Babchenko, in which he had been allegedly gunned down. However, Ukraine’s Security Service (SBU) stated on Wednesday that it had prevented an attempt on his life through a sting operation. "I put this action alongside a series of outlandish actions by Ukrainian authorities against Russia," Chairman of the Federation Council’s Committee for International Affairs Konstantin Kosachev told RBC. First Deputy Chairman of the Russian Federation Council’s Defense and Security Committee Franz Klintsevich added that the murder has been staged "to formulate a stereotype of Russia’s aggressive essence as part of the anti-Russian bias trend."
As the second reading of amendments to Russia’s Criminal Code on criminalizing adherence to the West’s sanctions on Russian soil has been put off after a great deal of criticism, expectations are high that the discussion of the bill will be stretched out over time, Kommersant writes.
State Duma (lower house) Speaker Vyacheslav Volodin said earlier this week that the bill would be considered by the lawmaking council in the second half of June after consultations with the government, adding that no final draft amendments have been put together yet. A source in the State Duma told the newspaper that the idea to impose criminal liability for complying with the sanctions arose after "one sanctioned company got a rejection when opening an account in a state bank." "A political decision (was taken) to end this practice on the banking and insurance market," he told the paper, adding though that once submitted, the subject of legal regulation shifted to another dimension and the bill "lost its initial aim" as commercial organizations were no longer mentioned, but liability for persons was added.
The lower house of parliament unanimously adopted the bill on criminal liability for complying with Western sanctions on Russian soil in the first reading on May 15. The draft law envisions amendments to Russia’s Criminal Code through a new article - 284.2 "Restricting or Refusing to Perform Ordinary Business Operations or Transactions for the Purpose of Assisting the Enforcement of Restrictive Measures Imposed by a Foreign State, a Group of Foreign States or by an International Organization." The bill envisions a maximum penalty of imprisonment for a term of up to four years. Russia’s business community considers it unacceptable to criminalize compliance with Western sanctions. Among its opponents are head of the country’s second-biggest lender VTB Andrei Kostin and head of the technology investment group Rusnano Anatoly Chubais. Chairman of the Federation Council’s Committee for Constitutional Legislation and State Building Andrey Klishas told Kommersant that senators and MPs are currently preparing the bill for its second reading. A source in the parliament added that due to the difficulties in endorsing it those involved in fine-tuning the bill would try to stretch things out for as long as possible.
Though NATO has not yet adjusted to the new security environment, Moscow is ready to continue cooperation with the alliance, Russia’s Deputy Foreign Minister Alexander Grushko said in an interview with Izvestia, adding that the country would protect its national interests taking into account the current situation. "Today we have to acknowledge that NATO has not managed to adjust to the new security conditions. The alliance is not integrating into wide global efforts aimed at neutralizing new threats and challenges, but is involved in countering a phantom menace coming from the east," he noted.
According to the diplomat, the global security organization has "not found itself in a new world." "This has an impact on the relationship between Russia and NATO. The problems inherited from the Cold War era have been solved, mainly due to efforts assumed by Russia and the Soviet Union. It was agreed with NATO that the alliance would survive and develop, though it would not ensure its members’ security through old constructions of the Cold War, meaning that NATO would not deploy nuclear weapons on the territory of its new members, create infrastructure for that, or permanently post substantial troops on their territory," Grushko explained.
"It was a recognition of the fact that the new security architecture should not rely on the logic of military balances, potentials and counter-potentials. However, now this all has been put out of commission, whereas NATO’s real policy is being copied from the Cold War. Everyone understands that when states that have announced themselves as ‘frontline’ are fighting for the deployment of foreign forces on their soil, Europe’s common security is undermined," the deputy minister said. "It takes two to tango. We have not broken anything, and we are ready for dialogue. However, in the areas where NATO is marching on (Russia’s) national interests we will be protecting those interests the way that any real situation demands," he added.
Asked about any progress regarding a UN peacekeeping mission in Donbass under Russia’s proposed plan, Grushko said that "the subject is being hashed over in political and information arenas." "Speaking about what is happening on the diplomatic track though, there is no progress. We submitted a draft resolution last year. Routinely it envisions respective amendments and counter-proposals to be submitted, though this is not happening. It feels as if Kiev is not really interested in implementing a peacekeeping operation in compliance with the Minsk accords," he emphasized.
Changes lie ahead for Russia’s state-run development bank VEB as former First Deputy Prime Minister Igor Shuvalov is about to become its head. RBC says citing two sources close to the bank and another in a state-owned lender that the corporation may become a platform for coordination of development institutions, including the Russian Export Center, the Russian Direct Investment Fund, the Russian Venture Company and others. Shuvalov unveiled such plans at a meeting with VEB’s managers on May 28, two sources told the paper. "It was a general discussion, not in detail," one of them said.
A source familiar with the discussion told explained to RBC, that the Russian Direct Investment Fund "would not become part of the proposal to coordinate development institutions in order to avoid additional sanctions-related risks due to association with VEB." The development bank with its core activity in funding large investment projects, was slapped with EU and US sectoral sanctions in 2014.
Experts interviewed by the paper assume that Shuvalov’s appointment as VEB head and coordination of development institutions at one platform is in line with his ambitions. Chief Economist at Alfa-Bank Natalya Orlova notes that the idea to integrate all development institutions is a healthy process as part of a general trajectory of the government’s new economic bloc, which is targeted at keeping the budget stable. "This kind of unification will reduce potential budget costs as one of the problems development institutions face is the risk of turning to financial assistance," she said.
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