Stockholm arbitration clarifies on its decision: both Naftogaz and Gazprom call victory

UKRAINE - In Brief 23 Dec 2017 by Dmytro Boyarchuk

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On Dec 22 Naftogaz published a release describing details on decision of the Arbitration Institute of the Stockholm Chamber of Commerce on lawsuit of Russian Gazprom against Naftogaz. According to the release Stockholm Arbitration: recognized $352 per tcm gas price for Ukraine in 2Q 2014 instead of $485 per tcm that Gazprom insisted on;rejected take-or-pay rule with $56 billion compensation that Gazprom was demanding;reduced compulsory volumes of gas purchase from Gazprom down to 5 bcm per year (Gazprom was insisting on 52 bcm per year);rejected Gazprom requirement to pay for gas supplied to occupied territories of eastern Donbas; On its side Gazprom publicly reported that arbiters obliged Naftogaz to pay $2 billion for gas supplied to Ukraine in 2014. Head of Naftogaz Andriy Kobolev does not confirm this sum claiming that total balance will be known only on Feb 28, 2018 when Stockholm arbitration will decide on Naftogaz claim against Gazprom on compensation of lost revenues from gas transit (Naftogaz demands $16 billion compensation). To sum up, even with potential payment of $2 billion to Gazprom the decision of Stockholm arbitration looks quite positive for Ukraine. However, now there is a big issue how to cover this payment amid stalled IMF program. There is a chance to get compensation on Feb 28, 2018. But the authorities very likely will not rely on good luck and will be adjusting their moves according to this “$2 billion issue”. I would say that this $2 billion payment will serve as a strong incentive to put aside political fight for a while and to spur reforms that all creditors demand. Anti-corruption comes first.