Gazprom terminates all contracts with Ukraine immediately

Gazprom terminates all contracts with Ukraine immediately

Kerry Wise
March 4, 2018

Ukraine and Russian Federation have been embroiled in two separate legal disputes regarding the transit of gas and gas purchases since 2014.

It follows Wednesday's worldwide arbitration court order for Gazprom to pay $2.56 billion (RM10.04 billion) to Ukraine's Naftogaz after weighing mutual claims and counter-claims related to gas supplies and transit.

Gazprom was trying to portray Ukraine in a negative light and suggest that it was willing either to let its own population freeze or make it out to be "an unreliable transit company that takes the gas away" from European countries, Naftogaz said in a statement. "This will improve security of supply and give Ukrainians affordable energy". The decision seriously violates the balance of interests of the parties under these contracts, according to Miller. The arbitrators ground their decision by the fact that the situation with the Ukrainian economy has drastically worsened. However, since 2012, Naftogaz failed to fully intake the contracted volume. He also said due to lack of gas supplies from Russia Ukraine faced a gas deficit and had to limit fuel consumption in the country since March 6. Since that date, it has been buying gas from Western Europe in order to reduce its energy dependency on Russian Federation, according to Reuters.

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Ukraine receives 2.3% of its GDP from gas transit services, Yuriy Vitrenko, chief commercial officer for Naftogaz Ukrainy, told delegates at the Ukrainian Energy Forum in Kiev on Wednesday. Naftogaz wanted a retroactive price change starting from May 2011.

President Petro Poroshenko has stated that Ukraine has sufficient natural gas reserves in its underground storage facilities. "We get more [revenues for] gas from transit than [we] pay for imported gas", he added. Naftogaz demanded that Gazprom should pay $17bn for the failure to supply the agreed volumes for transit.

Gazprom is unhappy with the ruling, which requires it to pay Naftogaz $2.56 billion in net damages for underpayments and under-deliveries under the 10-year contract that runs to end-2019. Summing the two awards, Gazprom has been left with a bill of $2.56bn.