27 Sep 2022 19:51

Gazprom warns Naftogaz lawsuit could result in sanctions ban on transactions on part of Russia

MOSCOW. Sept 27 (Interfax) - The new arbitration proceedings initiated against Gazprom by Naftogaz of Ukraine put the Ukrainian company in jeopardy of being sanctioned by Russia, which would mean an automatic ban on any relations with it, Gazprom said in a statement.

This could mean in practice a suspension of gas transit through Ukraine. Ukraine's gas transmission system works on the principle of substitution. Transit gas is consumed in the country's industrial east, while gas from underground storage facilities goes to the west. It is therefore precisely maintaining transit of Russian gas to Europe through Ukraine that has been Kiev's main goal.

At present, 42 million cubic meters of gas are pumped through Ukraine per day.

"Gazprom categorically rejects all of Naftogaz of Ukraine's claims in the arbitration proceedings initiated in relation to the transit of Russian gas to Europe - services not rendered by the Ukrainian party should not and will not be paid for," the statement said.

Gazprom notified the secretariat of the International Chamber of Commerce's International Court of Arbitration of this on Tuesday along with Naftogaz's acting head.

"Naftogaz of Ukraine has refused to fulfill its transit obligations through Sohranovka GMS without suitable grounds, and the fact of non-fulfillment of services has been admitted by the Ukrainian company. Naftogaz of Ukraine is perfectly aware that non-fulfillment of obligations on its part means non-payment according to the December 30, 2019 agreement even if Naftogaz of Ukraine announces a force majeure in Ukraine," the statement said.

Zurich, Switzerland, was determined as the location for dispute resolution in the agreement concluded in 2019 under Swedish law, it said.

"Sweden and Switzerland have joined the ranks of countries unfriendly to the Russian Federation thanks to the introduction of an enormous amount of sanctions against Russia. The substantially changed situation has deprived Gazprom of the fundamental right to fair and unbiased arbitration in both arbitration itself and the government courts where it is held," the statement said.

"Gazprom considers Naftogaz of Ukraine filing an appeal an unfriendly step and continuation of unprincipled behavior by the Ukrainian company, and further attempts by Naftogaz of Ukraine to achieve consideration of the dispute at the International Court of Arbitration could lead to Russian agencies of government authority having all grounds to introduce sanctions against Naftogaz of Ukraine and include it on the list of sanctioned entities. This will mean in practice a ban on Gazprom fulfilling obligations to sanctioned entities under concluded deals, including carrying out financial transactions," it said.