RUSSIA MONITOR

Date: 30 March 2020

Russia’s Gazprom Lost in Court Battle with Poland’s PGNiG

Russian state-run gas giant saw yet another failure in a legal spat with a Central and Eastern European company. First, it lost a court battle with Ukraine’s Naftogaz and now Poland’s largest gas distributor PGNiG emerged victorious in its litigation with Gazprom. The Stockholm arbitration court said in a ruling that the price of gas in the Yamal Contract failed to reflect the price level on the market and was overstated. Thus, Russian gas giant Gazprom must pay about $1.5 billion in a pricing dispute case. Warsaw sees its latest victory as a vital sign that proves its years-long policy of reducing reliance on Russian-sourced gas. Poland is developing its Swinoujscie LNG terminal while planning to build a new facility in Gdansk. Also, efforts are currently underway to construct the Baltic Pipe, a gas pipeline that is expected to connect Poland with Norwegian gas fields. Thus, Poland will be able to scrap Russian gas flows when its deal with Gazprom expires by late 2022.

SOURCE: KREMLIN.RU

Poland’s PGNiG lodged a lawsuit to an arbitration court back in February 2016, complaining about gas prices as set out in its Yamal contract with Russia. The Stockholm court said the amount Poland had to pay for Russian gas flows was overstated and failed to reflect the price level on the energy market. The court’s ruling applies from November 1, 2014, onwards. This means that the Russian company will be required to pay back to PGNiG an estimated $1.5 billion, which is the difference between the prices calculated based on the new formula and the amounts actually paid by Poland’s PGNiG.

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Gazprom has not yet commented on the ruling. Russia’s Gazprom Export, a Gazprom’s subsidiary, said it was studying the decision of the Stockholm arbitration court on reviewing Russian gas prices it had offered to the Polish energy company. Yet it remains unknown whether Russia will abide by the ruling. By late 2022, Gazprom will quit the Polish energy market anyway. In the past, the Russian gas firm failed to comply with unfavorable court rulings, as was the case with Ukraine. In response, Naftogaz filed lawsuits to arrest Gazprom’s assets in third countries, which brought some positive effects. Poland also has a possibility of doing so to force the Russians to comply with the ruling, even on its own territory. Alongside PGNiG, Gazprom has shares in a company that oversees the Polish section of the Yamal gas pipeline.

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