About lawsuits against the Russian Federation and against Gazprom

As the uncertainty remains about the “reformatting” of Naftogaz, which the President informed the Prime Minister about, I have the time and inspiration to work on the prospect of new lawsuits against Gazprom.


But first I will remind you about our lawsuit (investment arbitration) against the Russian Federation over assets in Crimea and explain how this process differs from the court cases (commercial arbitration) against Gazprom.


This week we are finalizing preparations for the next submission of documents in the framework of the arbitration process against the Russian Federation on assets in Crimea. This arbitration process has been going on for several years.

We have two main teams working on it. The legal department is headed by Yaroslav Teklyuk, and this project is managed on a daily basis by Olga Ivaniv along with Olga Kotlyarska and Mykhailo Chutakov. The economic direction (determination and substantiation of the amount of losses caused by the loss of investments of the Naftogaz Group) is headed by Alexander Vedeneev together with Olena Melnyk, Ivan Karpenko and Oleksandr Lytvynov. 

The legal team can be supported by Olha Khoroshilova, Advisor to the Chairman of the Board. I hope that in the next stages, Lana Zerkal, who recently became another advisor to the Chairman of the Board, will help us in our relations with international partners and PR. Although Lana Zerkal did not take part in the arbitrations of Naftogaz against the Russian Federation and against Gazprom in Stockholm, we can benefit from her experience in arbitrations against the Russian Federation, to which the state of Ukraine was a party (not Naftogaz, i.e. these were different  arbitrations).


I note that in the arbitration on assets in Crimea we are opposed by the state of the Russian Federation, not Gazprom. Therefore this arbitration does not fall under the settlement agreement with Gazprom, which Naftogaz concluded with it in December after Gazprom complied with the Stockholm arbitration decision, wherein it agreed to pay us compensation in the amount of $4.6 billion (plus $ 400 million of interest accrued as of the final settlement date), and to continue gas transit. 

By the way, the Prime Minister of Ukraine in his letter to the Supervisory Board of Naftogaz noted that the agreements with Gazprom became possible “thanks to the agreements reached by the political leadership of the state at the interstate level.” 

If this means believing that such arrangements played a key role, it would be good if the political leadership of the state reached an agreement right awayat the interstate level to that Russia pays us compensation for the loss of assets in Crimea (about $8 billion including interest).


Then we would save on legal costs and bonuses that everyone hates. But if this requires, like last time, first to win arbitration, then the appeal, seize assets abroad and come close to foreclosure, then everyone needs to realize the decisive role of Naftogaz in this process.

From the arbitration process against the Russian Federation, let’s return to our relations with Gazprom.


As I mentioned, at the end of December last year, after Gazprom complied with the Stockholm arbitration award to pay us $5 billion, we signed an agreement to settle all current disputes over gas supply and transit, which we are currently fulfilling in full without any violations on our side, and also on continued transit.

But this does not mean at all that relations with Gazprom can be forgotten.


First, we need to do a lot in Ukraine as a result of these agreements. I said this publicly immediately after signing these agreements with Gazprom. https://bit.ly/2ScjsvO Unfortunately, almost nothing has been done yet. 

Secondly, I should point out about the most pressing potential problems in relations with Gazprom which we are currently studying: 

– European companies that buy gas from Gazprom cannot move gas transmission points under current contracts to the Russia-Ukraine border;

– Gas-producing companies independent of Gazprom cannot export gas from the Russian Federation;

– Companies independent of Gazprom cannot transit gas from Central Asia through the territory of the Russian Federation; 

– We recently discovered the circumstances surrounding Gazprom’s role in Rosukrenergo’s debt-incurring transactions, which caused Naftogaz significant losses. 


Solving these problems will allow us to get: 

– additional billions in revenues from transit; 

– the reduction of gas prices in Ukraine by 25%, even without direct supplies from Gazprom and without politically motivated corruption that may be associated with it; 

– billions of dollars in compensation for losses from operations with debt obligations incurred by Rosukrenergo. 


We are currently studying the possibilities for Naftogaz to solve these problems, which include the following:


– filing a Complaint to the European antitrust authority (with the prospect of litigation in the Court of Justice of the European Union) regarding Gazprom’s abuse of its dominant position;

– international arbitration in Zurich under a new transit contract;

– international arbitration in Stockholm under a contract between Naftogaz and Gazprom for the assignment of the debt obligations of Rosukrenergo.


Of course, it is better to solve all problematic issues without litigation. Therefore, we plan  first to try to discuss these issues with Gazprom.


If we do not find a common language, we will turn to the political leadership of the state to reach agreements at the interstate level.

As mentioned above, in my opinion, my team is a key participant in the process, and the determining factor for receiving $5 billion from Gazprom by the Stockholm Arbitration was the victory in the previous arbitration, seizure of assets, success in appeals, etc., and for a new transit contract – our forgoing of launching well-founded claims in new arbitration in the amount of $12.2 billion and a complaint to the EU antitrust authority.


But if anyone thinks that the Russians paid up and signed a new contract primarily because of the an agreement being reached by the political leadership of the state, we will now have a great opportunity to verify this.  


P.S. I understand that the very mention of problematic issues in relations with Russia and Gazprom, not to mention the concrete opportunities to resolve these issues in favor of Ukraine, could irritate those who promote the idea of ​​”reconciliation” with Russia at the cost of actually refusing to defend Ukraine. 

For them, I will only recall the famous statement of Benjamin Franklin, one of the founding fathers of the United States (for those who are not interested in history, he may be better known as the man depicted on the hundred-dollar bills): “Those who would give up essential liberty, to purchase a little temporary safety, deserve neither liberty nor safety.” 


P.P.S. My team has also begun work on exploring the possibility of using a new transit contract to attract financing for investment projects. This is the so-called “securitization”, on the basis of which it would be possible to combine billions of dollars in investment projects, for example in the field of energy efficiency, something which is an extremely urgent need for Ukraine.