Naftogaz wants $20 billion more from Gazprom

 Naftogaz wants $20 billion more from Gazprom

Ukrainian energy firm Naftogaz intends to prove in a new arbitration dispute that the company under-received funds due to the abnormally low cost of gas transit via the Ukrainian territory, Naftogaz Commercial Director Yuriy Vitrenko said.

"The cost of [gas] transit via Ukraine is underestimated by a factor of 2. We are now trying to prove this. Since 2009, we have under-received some $20 billion," cited Vitrenko as saying.

Earlier, after the verdict of the Stockholm Arbitration Court was read, Gazprom announced that it has been forced to immediately break its contract with Naftogaz for the supply and transit of natural gas.

A leading analyst of the National Energy Security Fund, a lecturer at the Financial University under the Government of the Russian Federation, Igor Yushkov, speaking to Vestnik Kavkaza, noted that Naftogaz has very low chances of decision in its favor. "The court has already checked a contract between the companies for consistency with market reality and made a decision to satisfy only a part of Naftogaz's requirements, leaving the rate for gas transit unchanged. It's even strange that the Ukrainian company decided to address this issue again. But it is likely that Naftogaz's goal is different - it gives a signal to Gazprom, which wants to terminate relations, that if the companies return to court, the Ukrainian side will state even higher demands there, and then Gazprom would be a loser," he suggested.

The expert explained that Naftogaz is forced to behave this way, because it does not want to terminate contracts for the supply and transit of Russian gas. "It is unclear why such a weak option as a claim to the tariff for transit was chosen. In the long term, for Naftogaz it is also extremely harmful to voice these claims, because the company, in fact, deprives itself of arguments against the Nord Stream-2. Kiev says that Nord Stream 2 should not be built because it is a political project and economically it is profitable for Gazprom to continue to pump gas through Ukraine, but now it turns out that Naftogaz demands to raise the rate for pumping, so the Nord Stream -2 immediately becomes more economically profitable due to its low tariffs, especially because of the fact that Gazprom will pay for its sea part," Igor Yushkov stressed.

The deputy director of energy policy of the Institute of Energy and Finances, Alexey Belogoriev, agreed with the expert. "It is impossible to completely deny the possibility of Stockholm arbitration deciding in favor of Naftogaz. But studies have shown that the current tariff is quite competitive in comparison with similar tariffs in European countries. It will be difficult to prove that it is lower then needed by comparing it with the level of tariffs for gas transportation in Slovakia, Poland and other countries with similar economic conditions, because their tariffs are not higher, and often even lower than in Ukraine," he stressed.

In addition, these requirements of Naftogaz" only strengthen Gazprom's position in the case on breaking contracts with the Ukrainian side. "Naftogaz's requirements, if legally formalized as a claim, can be used by Gazprom as an argument that the transit contract is economically inefficient. In the long term, the court's decision in favor of the Ukrainian side will turn against Naftogaz. I think this position has also convinced many people in Europe that Gazprom's claims to Naftogaz are not groundless," Alexei Belogoriev noted.

"The demand of Naftogaz for raising the tariff to the level that is clearly above the market one is an additional argument in favor of the fact that there is no need to save this transit route. And Gazprom quite rightly states that the transportation of gas through the Nord Stream-2 is more cost-effective. And if it's about raising tariffs for pumping gas through Ukraine, then in the long term, the position of Naftogaz will lead to losses for Ukraine itself," the economist concluded.