Ukraine's Naftogaz to pursue $8 billion arbitration case against Russia over Crimea

Believes it is owed $8 billion in compensation

Russia annexed Crimea in March 2014

Follows settlement of Gazprom arbitration cases

London — Ukraine’s state-owned Naftogaz Ukrayiny is preparing for a new arbitration filing this week against Russia as it seeks $8 billion in compensation for the seizure of assets in Crimea following the Russian annexation of the region in March 2014, a senior Naftogaz official said Monday.

Naftogaz has already filed claims to the arbitration court in The Hague as it looks to recover $8 billion in compensation plus interest from Russia.

The Ukrainian company’s claims against the Russian state over the Crimea assets were left out of a settlement deal with Russia’s Gazprom agreed at the end of December, which canceled out all existing arbitration claims by both parties as part of a new transit contract.

“We are finalizing the preparation for the next filing of arbitration proceedings against Russia over assets in Crimea, a process that has been ongoing for several years,” Naftogaz chief commercial officer Yuriy Vitrenko wrote on his official Facebook page.

“In the arbitration case regarding assets in Crimea, we are opposed by the state of Russia, not Gazprom, and therefore this arbitration is not covered by the settlement agreement with Gazprom,” Vitrenko said.

Political cooperation

Vitrenko said he hoped that the case could be helped by cooperation at the political level between Moscow and Kyiv.

The agreement with Gazprom — which was finally signed on December 30 — was achieved thanks to agreements reached by the political leadership of the two countries, he said.

“If this means believing that such agreements have played a decisive role, it would be good if the political leadership of the country reached an agreement at the intergovernmental level to pay compensation for loss of assets in Crimea,” he said.

“Then we would save on the cost of lawyers,” he said.

If not, Vitrenko said, Naftogaz would look to follow the same route it took in the arbitration dispute with Gazprom — namely in the event of an arbitration victory to seize Russian assets abroad.

Naftogaz owned a number of oil and gas assets in Crimea before the annexation, including ChornomorNaftoGaz, the region’s biggest producer of gas from offshore fields in the Black Sea, two oil rigs each worth $400 million, underground gas storage facilities and gas pipelines.

Ukraine, the US and the EU denounced the annexation of Crimea by Russia in March 2014 as illegal.

ChornomorNaftoGaz produced 1.65 Bcm of gas in 2013 and was on track to increase gas output to 3 Bcm in 2015.

Russia also seized more than 2 Bcm of gas that had been kept by Naftogaz at Crimean underground gas storage facilities before the annexation, according to Ukrainian officials.

Gazprom deal

Vitrenko also said there were still some issues with Gazprom that Naftogaz he wanted to resolve.

He said it was still not possible for European buyers of gas from Gazprom to transfer gas transmission points under current contracts to the Russia-Ukraine border, while independent Russian gas companies also cannot export pipeline gas from Russia.

Gazprom has a monopoly on Russian gas exports by pipeline.

Vitrenko said Naftogaz was currently exploring ways to “address” these issues, including a complaint to the European antitrust authority about Gazprom’s alleged abuse of its dominant position.

“Of course, it is best to resolve all problematic issues without litigation. Therefore, we plan to try to discuss these issues with Gazprom first,” he said.

“If we do not find a common language, we will contact the political leadership to reach agreements at the intergovernmental level,” he said.

(c) spglobal

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