June 22, 2018

Gazprom seeks to halt Ukraine gas contracts as dispute escalates

04 March 2018, 03:55 | Simon Arnold

Sergei Savostyanov TASS

Sergei Savostyanov  TASS

Gazprom has applied to the Stockholm Arbitration court to terminate its gas contracts with Naftogaz, according to Gazprom CEO Alexey Miller, reports Tass. This was reported by Interfax with reference to the Deputy Chairman of the Board of Gazprom Alexander Medvedev.

However, the Stockholm arbitration court ruling is being opposed by the Gazprom. "In such a situation, the continuation of contracts is economically inexpedient and unprofitable for Gazprom", Miller said.

The problems included low and varying pressures at the Ukrainian grid entry point for Russian gas, and Ukraine's Naftogaz and Russia's Gazprom failing to agree terms for March gas supplies, leading to Gazprom on Thursday refusing to deliver pre-paid volumes to Naftogaz.

The actual amount of money that Gazprom has to pay will amount to $2.56 billion, because Ukraine still owes the Russian company around $2 billion for gas it imported from Russia in 2014 and 2015, The Moscow Times reports, citing Naftogaz as its source.

Russia's Energy Ministry said on Saturday that gas giant Gazprom's intention to terminate contracts with Ukraine poses no immediate threat to natural gas supplies to Europe through Ukraine.

Naftogaz declined immediate comment on the decision.

In this regard, Ukrainian President Petro Poroshenko has indicated that Kiev will demand the seizure of Gazprom's assets if the Russian side fails to comply with Stockholm arbitration.

Ukraine receives 2.3% of its GDP from gas transit services, Yuriy Vitrenko, chief commercial officer for Naftogaz Ukrainy, told delegates at the Ukrainian Energy Forum in Kiev on Wednesday.

A Gazprom spokesman did not respond to a request to comment on possible risks to the Russian gas exports to Europe. Naftogaz also referred to the negotiations earlier offered to Gazprom on the need to revise the transit tariff from 2010 in accordance with the European rules.

"Russian Federation must prove that it is a reliable supplier of gas", - said in a statement.

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

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