Gazprom terminates gas supply contract with Ukraine's Naftogaz

Sergei Savostyanov  TASS

The move follows a ruling in a Stockholm arbitration court, which ordered Gazprom this week to pay Ukraine's energy firm Naftogaz in a long-running dispute over fees.

The row, which is a by-product of broader political tensions between the two countries after Russia's illegal annexation of Crimea and its support for separatists in the conflict in eastern Ukraine, is also threatening to have an impact on gas supplies to the EU.

The head of Naftogaz, Andrei Kobolev, said on Twitter that the decision marked "an important day for the Ukrainian people and the future of European gas markets", while Ukrainian President Petro Poroshenko congratulated Ukrainians and called the ruling "a convincing and historic victory!"

"Gazprom had to immediately start the procedure of the termination of the contracts with Naftogaz on gas supplies and transit at the Stockholm arbitration court", Miller said. "This will improve security of supply and give Ukrainians affordable energy", Kobolyev added. As experts noted, the volumes of transit were included in the contract, however, there were no penalties in the documents and the Stockholm Arbitration established them independently. The arbitrators ground their decision by the fact that the situation with the Ukrainian economy has drastically worsened.

"At the same time, Gazprom did not supply Naftogaz with 18 million cubic meters of gas, for which the company made a prepayment".

Due to an emergency gas shortage, Ukraine's power plants must now use oil instead of gas. The reason the volumes of contractual gas has been reduced to such a small amount is the take-or-pay provisions remain in place, but apply to only this vastly reduced volume of gas.

Ukraine's state-owned gas pipeline operator Ukrtransgaz, however, said it had to take extra measures to ensure gas transit to its European customers.

The Stockholm court partially satisfied this claim, and said that Gazprom had indeed not met the agreed-upon quota between the years 2009 and 2017, but also ruled that a little over $4.5 billion dollars in damages should be paid, Kommersant said in another article.

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