Naftogaz claims victory against Gazprom over valuable gas supply contracts

Ukraine's Naftogaz has reported that an arbitration tribunal in Stockholm has ruled in its favour in a dispute with Russia’s Gazprom over gas supply contracts in a dispute said to be worth some US$80 billion.

14 June 2017

A Stockholm Chamber of Commerce arbitration tribunal has made one of the first of several expected rulings in a dispute between Ukraine's Naftogaz and Russia’s Gazprom, which has been ongoing for three years. The issues in dispute are said to be worth US$80 billion.

The ruling has apparently rejected Gazprom’s controversial ‘take-or-pay’ claim, which could exempt Naftogaz from paying around US$34.5 billion for gas which was not delivered but in respect of which Gazprom has maintained payment should be made under the contract between the two companies. The unpublished award apparently also upheld Naftogaz’s claim for downward price revision and ruled invalid a clause prohibiting Naftogaz from re-exporting purchased gas.However, it did not all go Naftogaz’s way – the tribunal reportedly ruled that Naftogaz was obliged to pay certain unpaid invoices to Gazprom.

This arbitration award is another major decision which has been taken in relation to disputes between the once friendly neighbours following Russia’s 2014 annexation of Crimea.  Ukraine’s President Petro Poroshenko hailed the award as an “important step on the way to energy security”. However, Gazprom noted that the award was merely an “intermediate decision” in the dispute. 

More rulings are expected on disputes emanating from the 2014 Crimea crisis.  A ruling on a related gas transit contract will be significant to commerce in the region. In 2016, some 45% of Russia’s gas supplies to Europe passed through Ukraine. In future, Russia plans to expand alternative pipeline projects, including Nord Stream, which bypass Ukraine and threaten to bring sharp cuts to the transit flow of gas through Ukraine.