Gazprom: termination of contracts with Ukraine may take up to two years

Russia’s Gazprom intends to appeal the decision of the Stockholm Arbitration Court regarding the transit contract with Naftogaz Ukraine before the end of the month, as well as initiate procedures for the termination of contracts "in accordance with the established procedure," said by Gazprom’s  CEO, Alexei Miller, at a meeting with Russian Prime Minister Dmitry Medvedev.

"According to the decision of the Stockholm Arbitration Court, Gazprom must pay Naftogaz of Ukraine 2.56 billion dollars. Immediately, the NJSC Naftogaz Ukraine released a statement that for both the upcoming year of 2018 and for 2019, prior to the conclusion of the contract’s validity, that…Naftogaz Ukraine, on the basis of the decision of the Stockholm Arbitration Court, would exact more penalties from us, and that we would have to pay several billion dollars more. Of course, in such conditions for us these contracts become economically ineffective, inexpedient from the economic point of view, and Gazprom made a decision to initiate procedures to terminate the contracts by legal means through the Stockholm Arbitration Court," he said.

According to the results of two arbitration proceedings in the Stockholm court, Gazprom must pay 2.56 billion dollars to the Ukrainian company Naftogaz. In addition, Gazprom’s penalty for non-payment of the compensation for the transit contract to Naftogaz is $526,000 per day.

"We have already filed an appeal for the contract for the supply of gas to Ukraine; an appeal for the transit contract will be filed by the end of March, and the procedures for the termination of contracts in accordance with the established procedure have [already] been initiated.

Undoubtedly, the termination of contracts is not a very quick process. Conceivably, give or take, one and a half to two years. But there are currently no risks for the transit of gas to Europe through the territory of Ukraine, unless there is unsanctioned siphoning by Naftogaz Ukraine. We, without doubt, expect that in new proceedings the Stockholm Arbitration Court will correct the imbalance of the interests of the parties," Miller said.

The gas and transit contracts between Ukraine and Russia are valid through the end of 2019.

  Gazprom, Naftogaz, Ukraine, Russia