Ukraine's and Russia's argument ended in a draw

However, Gazprom can still get about $1 billion.
The scandalous dispute in the Stockholm Arbitration between Gazprom and Naftogaz of Ukraine was resolved neutrally from the point of view of financial claims and the victory of the Ukrainian company, if we assess the changes in the fundamental terms of the contract. The main requirement of Gazprom - to pay the gas not selected by the condition of take-or-pay - is rejected, prices will now be tied to the European gas hub, and Naftogaz gets the right to re-export Russian gas. But Kiev's demands for a price revision are also largely rejected. As a result, according to Kommersant's estimates, Naftogaz should pay about $ 1 billion, although the suit could lose $ 47 billion.

The Stockholm arbitration on Wednesday sent Naftohaz Ukrayiny and Gazprom an interim solution to the dispute over the 2009 contract for the purchase of gas. The document outlines the principal approaches of arbitration to the issue, there are no final figures in it. Gazprom did not comment on the decision, recalling that it expects a final decision by the end of June. The Ukrainian side at all levels announced its victory.

The contract for ten years was concluded in January 2009 after the gas crisis, when Gazprom accused Naftogaz of selecting transit gas and drastically cut shipments. In the standard agreement for that time, there was a high binding to the price of oil, which led to the fact that in 2010 the price for Ukraine increased sharply. Naftogaz did not go to arbitration, and Gazprom closed its eyes to the fact that Ukraine did not choose contract volumes for take-or-pay. In 2012, Ukraine received a discount of $ 100 for 1 thousand cubic meters in exchange for basing the Black Sea fleet in the Crimea, and when in 2014 the discount was canceled, the price rose to $ 485 per 1,000 cubic meters. But Naftogaz did not pay at this price and applied to arbitration.

According to the decision, which was briefly stated by the Deputy Foreign Minister of Ukraine Elena Zerkal, the main requirement of Gazprom - the take-or-pay application from 2012 for $ 37 billion (without interest and penalties) was rejected. Naftogaz is allowed to re-export to Europe purchased gas, the price will be revised from the beginning of 2014 on the basis of the prices of the "European hub" (gas trading platform). Thus, the arbitrators basically rejected Naftogaz's demand for a price revision, which covered the period from May 2011 to October 2015 (see also on Kommersant's website). The interlocutors of Kommersant in Gazprom generally confirmed these arbitration approaches. According to one of them, the "European hub" means the German NCG, taking into account the cost of transporting gas to the Ukrainian border (the "reverse price").

An interim (separate) decision can be made both on procedural matters and in substance, explains the general secretary of the Arbitration Association Roman Zykov. "This can be full or partial satisfaction of the requirements," says the lawyer, "and the specific amount that will be awarded to one of the parties will be determined by the arbitrators later, no clear deadlines have been established for this."

But also proceeding from these data, it is possible to calculate approximate sums of payments of the parties. Since the retroactive price adjustment does not affect 2013, Naftogaz will probably have to pay Gazprom about $ 550 million for gas delivered in November-December.

This is the difference between the contract price and the "compromise" of $ 268 per 1,000 cubic meters, for which Naftogaz paid these volumes at the end of 2014 as part of the "winter package" (the agreement between Moscow, Kiev and the European Commission). Remain also paid for the same price volumes delivered in April-May 2014, of the price of reverse in the third quarter of 2014, Naftogaz should pay about $ 518 million. And for the period from the fourth quarter of 2014 to October 2015, the Russian company Should return "Naftogaz" about $ 44 million.

Naftogaz will formally be in the red, but the outcome looks like a success for the Ukrainian company, since with a literal interpretation of the contract by arbitration, the losses would have been much greater. "Naftogaz" also achieves a real integration into the gas market of Europe and by re-exporting it gets a chance to develop trading operations with Russian gas. Kommersant's interlocutors in Gazprom, on the other hand, were unpleasantly surprised, a special concern is the cancellation of take-or-pay, as this is one of the foundations of any long-term gas contract. "We bear costs, we support the extraction and transportation capacities, since we have to supply gas, and the buyer is generally relieved of obligations," complains one of them. In his view, arbitration was guided by the political goal of making a "no man's" decision, but this threatens the stability of the gas market.

Theoretically, the current decision (if Gazprom does not challenge it) provides the basis for negotiations on a new contract after the expiration of the current one in 2019. However, the new framework makes for Gazprom justified a short-term agreement with a small contract volume and reduced flexibility of supply.