UKRAINE MONITOR
Date: 5 April 2018
Ukraine beats Russia
Ukrainian oil and gas company Naftogaz has won in the Arbitration Tribunal in Stockholm against Russian energy company Gazprom. This is an extremely important event in the Russian-Ukrainian gas wars with Europe in the background. Politically, it is the victory of Kyiv, which has been repeatedly accused by the Kremlin of using illegal practices.
Russia and Ukraine have been suing each other in the Stockholm Tribunal since June 2014. Gazprom demanded that Naftogaz pays for gas supplied to Ukraine in the years 2013-2014 under a contract signed with Russia by former Prime Minister Yulia Tymoshenko. The dispute concerned an agreement concluded in 2009, during a completely different historical era, which was valid until the end of the following year. The Tribunal ruled that Gazprom owes Naftogaz 4.6 billion dollars, which does not particularly seem like a small amount of money. Gazprom called the judgement unfair and announced that it will appeal against the sentence by all available means.
The ruling of the Tribunal appeared in the last phase of the presidential campaign in Russia and was not good news for the supporters of Vladimir Putin. That is why Gazprom and the Russian press announced that gas contracts signed with Ukraine are to be terminated as soon as possible, which is impossible to do in the next few years. Russia cannot give up Ukrainian gas networks if it intends, and it does intend, to sell gas in Europe. Gazprom also reduced gas supplies to Ukraine, but Kyiv had bought gas from Poland, so Moscow abandoned its attempts to spectacularly punish Ukraine.
The verdict of the Stockholm Tribunal has strengthened the activity of both supporters and opponents of the construction of the Nord Stream 2 gas pipeline. For the former group, it is an argument for its immediate termination and for the elimination of Ukraine from the transit market, while the latter group perceives it as another proof of the reality of threats resulting from Gazprom’s monopolistic position and the Kremlin’s raw materials policy.
In Kyiv, the Stockholm victory did not receive a euphoric welcome. For some, it even turned out to be troublesome: Ukraine is expecting another gas price rise, meaning that gas is a socially sensitive topic. The Government and Naftogaz have different concepts of reforming the gas sector: the Prime Minister rather distances himself from the victory, whereas the position of the company’s management has been strengthened. The President congratulated them. But does this mean support?
The opposition remains silent on the matter. This is understandable: Tymoshenko signed a gas contract with Putin, the then Prime Minister of the Russian Federation, which turned out to be very unprofitable for Ukraine. At present, Tymoshenko’s Fatherland Party (Ukrainian: Batkivshchyna) is in opposition and she herself intends to run in the presidential election. What is more, the opposition associated with former Ukrainian President Viktor Yanukovych does not wish to be reminded of giving Russia a part of the Crimea for gas discounts. In 2010, Yanukovych signed an agreement with the then President of Russia, Dmitry Medvedev, as a result of which Ukraine was buying gas from Russia with a 30 per cent discount in exchange for the lease of military bases to the Russian Black Sea Fleet on the peninsula, extended for 30 years.
The Stockholm victory of Ukraine is good news for Europe. The gas market is slowly but surely emerging from the shadows, indicating that it is becoming more transparent, explicit, predictable and non-threatening to the security of the Old Continent.
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