Will Ukraine confiscate Russian gas from Europe?

Will Ukraine confiscate Russian gas from Europe?

Kiev's Economic Court has changed the way of enforcing a court decision to recover a fine of $6.7 billion from Russia's Gazprom, extending penalties to all property of the debtor,  the Minister of Justice of Ukraine Pavel Petrenko said.

He said that the court decision should be made public in a few days.

The Antimonopoly Committee of Ukraine and the executive service of the Ukrainian Ministry of Justice filed a claim for execution, and the court only changed the way of execution regarding the $6.7 billion fine.

"Earlier it was possible to recover only Gazprom's funds placed in banks, but now the recovery is extended to all property of the debtor," Petrenko wrote on his Facebook page.

In February 2016, the anti-monopoly committee of Ukraine has fined Russia’s Gazprom $3.36 billion for alleged abuse of its dominant position on the Ukrainian gas transit market. As a result, a fine totaling nearly $6.4 billion was ruled by the court last December. Gazprom challenged the decision but its appeal was dismissed.

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 with a correspondent of Vestnik Kavkaza, noted that if Ukraine really starts confiscating Russian export gas as Gazprom's property, it will be even positive thing for Russia, because it will convince Europe of the unreliability of the Ukrainian gas supply route.

"I think that in this case, Gazprom will need to convene a tripartite commission to demonstrate to Europe that a certain volume of gas is delivered to the pipeline on the Russian-Ukrainian border, and a much smaller amount of this gas leaves Ukraine. Thus, Gazprom will prove that the gas is lost during transportation, and Europeans must confirm it. We should not take drastic steps, until the situation is not fixed by all parties, especially since we have a number of alternative gas pipelines, which can be used for several days to supply Europe, even if Kiev seizes all transit gas," he said in the first place.

"If Ukraine starts seizing Russian transit gas, it will be a colossal gift to Russia and Gazprom, because Ukraine will prove that it is not a reliable transit country. Then we will be better able to argue our need to build gas pipelines bypassing Ukrainian territories," Igor Yushkov said.

But it is much more likely that Kiev will use this decision to pressure Russia, since it does not want to undermine its status as a reliable transit country. "When the Ukrainian antimonopoly committee was just starting to make claims to Gazprom, it was clear that if something goes wrong, Kiev may arrest Gazprom's property in Ukraine. Back then Ukraine faced enormous risks of shortage fuel, and the authorities needed a mechanism for more or less legitimate gas withdrawal from the gas pipeline. Now the gas situation has become much better, so this mechanism has now been simply finalized," the expert explained.

The executive vice-president of NewTech Services, professor of the Gubkin Russian State University of Oil and Gas, Valery Bessel, agreed that Kiev's decision is politically motivated. "It may create some problems at this stage, because until 2019 we will have to use Ukraine's gas transportation system to transport our gas to Europe. Of course, this court decision can be implemented only after Gazprom will be able to submit an appeal," he noted.

"I do not think that Europe will calmly agree with Kiev withdrawing gas destined for European consumers. But if Europe agrees with the decision of the Kiev court, it will start to demand additional gas supplies from us. However, the Kiev court's decision has to be considered by several appellate instances to be approved by Europe. It will not be recognized by the EU right away. Ukraine may choose to withdraw gas before it, but the only question is who will compensate for it, because Kiev will take gas not from Gazprom, but from Europe. The situation is not simple at all," Valery Bessel warned.