Bloomberg: Ukraine Sees Gas Price Change Awarded in Dispute With Russia

A three-year legal battle between Russia’s and Ukraine’s dominant natural gas companies may be nearing the finish line

• Country doesn’t rule out judgment being made on Dec. 22
• Ambiguity may remain as parties can’t agree on gas volumes

By Volodymyr Verbyany and Daryna Krasnolutska

(Bloomberg)

A three-year legal battle between Russia’s and Ukraine’s dominant natural gas companies may be nearing the finish line.

A final ruling by the Stockholm arbitration court on the lawsuit between Ukraine’s NAK Naftogaz Ukrainy and Russia’s Gazprom PJSC on Dec. 22 can’t be ruled out, according to Naftogaz Chief Commercial Officer YuriyVitrenko. The Kiev-based company expects the court to revise the price it paid for natural gas imports from Russia in the second quarter of 2014 and rule on deliveries to Kremlin-backed separatists in Ukraine’s east.

The verdict would close one chapter in the fierce dispute between the two companies as a military conflict sours relations between the nations and after gas supply and transit disagreements that spilled out to affect deliveries to Europe last decade. The court in May issued a judgment that freed Naftogazfrom an obligation to pay Gazprom for a minimum volume of gas, whether it needed the fuel or not. Ukraine also expects a favorable decision on a separate transit claim against Gazprom, which may come on Feb. 28, Vitrenko said.

“This price revision for the second quarter of 2014 is the most important question,” Vitrenko said in his office in Kiev. However, clarity on “who owes what and to who, how it will be paid and when and how it would be enforced” may not come until February, he said.

Naftogaz expects to get a “significant” amount of money after the two rulings from Gazprom, which may be cut by payments it has to make to the Russian company, Vitrenko said. Gazprom’s press service declined to comment.

Price Doubling

Russia almost doubled the price it charged Naftogaz from April 2014 after canceling previous discounts. Ukraine rejected that move and continued to pay for the fuel at the prior rate, which led Gazprom to seek $3.2 billion in compensation including interest as of December 2017 for the second quarter of 2014, according to Vitrenko. The Stockholm court will also make a decision on how the gas should be priced, specifically to which European gas benchmark and contract duration.

Given a market-based and fair value, Ukraine would probably resume buying gas from Russia after a two-year break if the revised price is favorable and the issue over supplies to separatist areas is resolved, Vitrenko said.

Gazprom also says that Naftogaz must pay for gas it supplied to Ukraine’s eastern regions, seized by pro-Russian separatists in 2014. Ukraine has argued that it didn’t order that fuel and so won’t pay for it, which might lead to future negotiations or even new arbitration between the two companies over volumes, Vitrenko said.


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