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Gazprom appeals gas order

Russian giant Gazprom has filed an appeal on a recent Ukrainian gas transit arbitration ruling in the Svea Court of Appeal in Sweden, writes Vladimir Afanasiev.

The company is trying to overturn a ruling of an international arbitration institute in Stockholm that ordered Gazprom to pay about $4.7 billion to Ukraine’s state gas importer and distributor, Naftohaz Ukrainy, for failing to transport a minimal contracted volume of gas across the country to Europe.

Last month, Gazprom also appealed an earlier ruling of the same institute, in which Naftohaz was asked to pay about $2.1 billion to Gazprom for old gas deliveries to Ukraine before 2015.

Initially, Gazprom executives expressed satisfaction with this earlier ruling in their favour, but quickly changed their minds and tone when the second ruling went against them.

Industry analysts said that 10-year gas sales and gas transit agreements, signed by Gazprom and Naftohaz in January 2009, state that both sides should consider the arbitration awards final.

A Gazprom executive has acknowledged that, despite the appeals, the monopoly will nonetheless create a reserve of about $2.6 billion in its balance sheet to reflect a potential payment in its 2017 financial report.

Unhappy about the second ruling, Gazprom refused to resume direct gas deliveries to Ukraine earlier in March, with its executives claiming that the company has the right not to continue with gas transit flows across the country to Europe.

Naftohaz’s commercial director, Yuri Vitrenko, has estimated that a potential halt in Russian gas transit will leave the state-owned company with a $3 billion annual dent in its budget.

Vitrenko said it will also increase the risk of Russian military intervention as Ukraine loses importance as a key gas transit partner for Gazprom.

Gazprom executive chairman Alexei Miller said this week in Ankara that Russia will reduce gas transit flows across Ukraine to Europe by “ten times” to between 10 billion and 15 billion cubic metres once its new gas pipelines, TurkStream and Nord Stream 2, are operational.

Miller said Gazprom also wants Ukraine to accept new terms for Russian gas transits.

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