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Nazftogaz sues Gazprom again in $11.5 billion gas transit claim

July 09, 2018/ 12:34

Kiev. Ukraine state oil and gas producer Naftogaz slapped Russia with a new lawsuit last week, claiming $11.5 billion in damages over unfair terms in a 2009 gas transit agreement.

In the case, filed in the Stockholm court of arbitration, Naftogaz is demanding revision of fees for the transit of Russian gas through Ukrainian territory from Russian gas monopoly Gazprom.

“The transit fees stipulated by the 2009 contract do not match the prices on European gas market, which has seen significant changes, including price-setting regulations,” Naftogaz said in a statement released on July 6. It demands that transit fees be brought to European rates as of March 2018 until the end of the contract in 2019.

According to the original contract with Gazprom, the fee for transit services was fixed for 10 years, starting with a 20 percent discount in 2009.

Naftogaz already tried to settle the issue in its first claim against Gazprom, filed in 2014. The legal battle took four years and culminated in a victory for the Ukrainian side. The Stockholm court ordered Gazprom to pay $2.56 billion to Naftogaz as compensation for under-delivered volumes of transit gas between 2009 and 2017.

The arbitration, however, didn’t satisfy Naftogaz’s demand to reconsider the terms of the gas transit contract itself. Ukraine argues that the contract fails to match both its domestic and European energy law, and is asking the court to bring the terms of the agreement in line with both jurisdictions.

Naftogaz said it was forced to go to court again since Gazprom “took an unconstructive position” at talks initiated by Ukrainian side earlier in March regarding the revision of transit fees. Gazprom has not responded yet.

But the Ukrainian company is ready to make a compromise, according to Naftogaz Director for Business Development Yuriy Vitrenko, who has also overseen legal strategy in the series of lawsuits.

“The sum of claims will be reduced if Gazprom reserves gas volumes for transit (through Ukraine) after 2019 and/or it stops blocking gas transit from Central Asia and exports of other Russian companies,”  Vitrenko wrote on his Facebook page.

The future of Ukraine as a transit route for Russian gas to the European Union is unclear after Russia completes the construction of the Nord Stream 2 pipeline bypassing Ukraine.

The next attempt to start negotiations over the possible extension of the transit contract is scheduled for mid-July, according to the Russian website Vedomosti. Trilateral meeting of Ukraine, Russia, and the European Union may take place on July 17-18, Vedomosti reported citing Russian energy minister Aleksandr Novak

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