Gazprom to pay Ukraine’s Naftogaz $2.9 billion by end of 2019

Russian Gazprom and Naftogaz of Ukraine will sign an agreement to settle all reciprocal claims relating to their current contracts in accordance with the gas cooperation protocol, Gazprom CEO Alexey Miller told the press on Saturday, December 21. “The settlement agreement envisages the waiver of new claims, the withdrawal of arbitration and court claims for which there are no final decisions, and payment in accordance with the final decision of the Stockholm Arbitration Institute,” the Interfax news agency cites Miller as saying.

Gazprom Spokesperson Sergey Kupriyanov confirmed to RBC that $2.9 billion including penalty interest will be paid to Ukraine by the end of 2019. Gazprom will also withdraw its appeal of the Stockholm Arbitration Institute’s ruling, which the court was supposed to consider at the start of 2020.

Ukrainian Minister of Energy and Environmental Protection Oleksiy Orzhel told the Ukrainski Novini (Ukrainian News) News Agency that, once the funds have been received from Gazprom, Kyiv will withdraw the rest of its claims against Gazprom for compensation related to transit services.

At the same time, bilateral negotiations between the Operator of the Gas Transportation System of Ukraine Ltd (OGTSU) and Gazprom are underway in Vienna, OGTSU Director Serhiy Makohon wrote on Facebook. The parties need to agree on the parameters of the new agreement for gas transit through Ukraine that was reached by Moscow and Kyiv with the EU’s assistance on Saturday in Minsk.

According to Oleksiy Orzhel, the parties have provisionally agreed that the new transit agreement will be valid for five years, with the option of extending it by another 10 years. “The minimum guaranteed volumes for transit are 65 billion cubic meters of gas in the first year and 40 billion cubic meters of gas in the next four years,” said the minister. However, Orzhel noted that the transit tariff imposed on the Russian gas will be increased. The exact figure will be determined by the regulator on the basis of the transit volumes, in accordance with the European method for determining tariffs.

The Ukrainian company is in favor of the principle “pump or pay” which was voiced by the European Commission at consultations in September. According to Naftogaz director Yuriy Vitrenko, even if Gazprom does not pump the prescribed quantities, it will still be obligated to pay the transiter country for the transit quantities stipulated in the contract.

Oleksiy Orzhel also told the press that the possibility of Naftogaz buying Gazprom’s gas directly had been excluded from the package of gas agreements reached by Ukraine, Russia and the European Commission in Berlin and Minsk.

“As part of the package of agreements which we have reached, there will be no direct supply. You will see in the minutes that, if it potentially does happen, it will only be on the basis of the European hub’s prices,” he said at a press conference in Kyiv.

  Gazprom, Russia, Ukraine, Naftogaz