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‘Crimea’s Effect’: Naftogaz to Pay Gazprom $2.56 Billion in Court Settlement

Ukrainian state-run energy company Naftogaz said that Russia’s giant Gazprom would have to pay it $2.56 billion after a Swedish court ruled in Naftogaz’s favor in the final stage of a long-running legal case. In mid-2014, Gazprom and Naftogaz lodged multi-billion dollar claims against each other at a Swedish arbitration court, which put an end to commercial disputes. The disagreement should be seen in the context of deteriorating relations between Kiev and Moscow since Russia’s annexation of Crimea.

The Stockholm-based court ruling effectively backedNaftogaz’s claims that it was owed compensation for Gazprom not producing a certain volume of gas annually via Ukraine and paying too little for what it did send through the pipelines of the Ukrainian company. “Naftogaz was awarded damages of $4.63 billion for Gazprom’s failure to deliver the agreed transit gas volumes,” the company’s spokeswoman Olena Osmolovska said. There was no immediate comment from the Russian company.

Since the court previously ordered Naftogaz to pay its Russian counterpart for gas supply arrears, net amount that the Russians will have to pay to the Ukrainians is $2.56 billion, Ms. Osmolovska said. The Arbitration Institute of the Stockholm Chamber of Commerce did not comment on the ruling, leaving it up to both sides to go public if they wanted to.In previous rulings, the court did not approve of Gazprom’s claim linked to a ‘take-or-pay’ clause that required buyers pay for gas whether they take physical delivery or not. Yet, it also ordered the Ukrainian company to pay $2 billion for the gas arrears and ruled that it should purchase 5 bcm of gas from Gazprom annually from 2018.

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