Ukraine starts withholding Gazprom gas transit payments to recover the debt

Ukraine’s national oil and gas company Naftogaz recovered $3.8 million received in overpayment from Gazprom for the transit of gas in October towards the amount that Gazprom is obliged to pay according to the decision of the Stockholm Arbitration Court.

“Naftogaz of Ukraine sent a statement to Gazprom about withholding the funds received for transit of gas this October in the amount of $3.8 million as payment of a fine that the Russian monopoly owes according to the Arbitration decision from February 28, 2018, under the transit contract,” the statement published on Nafrogaz’s website reads.

“Gazprom still refuses to implement the decision of the Stockholm Arbitration Court, which is why Naftogaz warns that it will continue to withdraw overpayments for the gas transit towards these penalties .”

The dispute between Gazprom and Naftogaz concerns contracts for gas transit through Ukraine. In February, the arbitrators ordered the Russian company to pay the Ukrainian company a fine of approximately $2.6 billion.

On May 29, Naftogaz initiated the process of forcibly collecting the debt, freezing Gazprom’s assets in Switzerland, the Netherlands and the UK. However, on June 13, the court of appeal suspended the implementation of the arbitration court’s decision.

On Thursday, June 28, Gazprom reported that the Swedish court had enforced its suspension of the ruling.

However, Naftogaz emphasized that it was only a temporary suspension: the Ukrainian company had not yet had the opportunity to present its counter arguments to the court. Naftogaz intended to make an additional statement, hoping for a revision of the latest decision.

“The present ruling is not binding to courts in other jurisdictions. Accordingly, Naftogaz will continue its activities to collect Gazprom’s debt in other jurisdictions,” the company stated.

The seizure of Gazprom’s European assets led to the company being effectively cut off from the European capital market. In the middle of June, the company, which is using debt to finance the construction of gas pipelines to China, Turkey and around Ukraine, was forced to call off its placement of eurobonds in British pounds. The risk arose that the funds solicited by Gazprom may have been seized immediately as part of the interim measures to collect the $2.6 billion fine.

The placement was meant to be part of a record in the history of Gazprom’s borrowing program. Overall, the company planned to solicit loans amounting to 417 billion rubles, roughly a third of the cost of the primary construction sites (1.2 trillion rubles).

  Ukraine, Naftogaz, Russia, Gazprom