Michael MacKay, Radio Lemberg, 21.03.2018
The Ukrainian government has seized all the assets of Russia’s Gazprom in Ukraine. Enforcing international court rulings, Ukraine next will be going after $9.3 billion in assets of Gazprom everywhere in Europe. Exercising lawful judgments, Ukraine has a good chance of killing the Nord Stream 2 scheme, putting the criminal monopoly Gazprom out of business, and saving Europe’s energy security for generations to come.
Things are going from bad to worse for Russia in its gas war against Europe. First, Russia’s Gazprom lost in a dispute with Ukraine’s Naftogaz in the Arbitration Institute of the Stockholm Chamber of Commerce, and must pay an award of $2.56 billion. Then, Russia tried to blackmail Ukraine and the European Union by cutting-off of transit gas; Ukraine saved the day with conservation measures and diversification of natural gas supply. Now, Gazprom is facing seizure of its assets in Ukraine. Ukraine is coming out on top in the gas war that Russia started against Europe.
On March 20, Ukraine’s Ministry of Justice announced that it had seized approximately $3.85 million in assets of Russia’s Gazprom in Ukraine. This is a tiny downpayment on the staggering debt that Gazprom owes to Ukraine. The Minister of Justice, Pavlo Petrenko, stressed that Ukraine would seek enforcement of court rulings in jurisdictions other than Ukraine. Russia’s Gazprom owes Ukraine’s Naftogaz $2.56 billion under the Stockholm Arbitration Tribunal award – the net amount owed to Ukraine under completed contracts for transit of Russian natural gas through pipelines across Ukraine. Gazprom also has been found guilty in Ukrainian courts of monopolistic practices which amounted to gross violations in the Ukrainian energy market, and was fined $6.74 billion under that judgement. In addition, Ukraine expects a ruling later this year on $8 billion in claims against Russia for seizure of natural gas assets in Crimea – these claims were filed with the Permanent Court of Arbitration at The Hague.
Gazprom is in big trouble, and consequently Russia. Russia cannot deny that it seized natural gas assets in Crimea, because Russia openly claims that it has ‘annexed’ Crimea. Russia also cannot deny that it committed high seas piracy by seizing two Ukrainian oil rigs from out of Ukraine’s exclusive economic zone in the Black Sea, because Russia boasts of doing that too.
All of the assets of Gazprom in Ukraine have been seized. With the upper hand, Ukraine is now going after $9.3 billion in assets of the Russian company anywhere in the world they can be found. That amount is likely to go up to over $17 billion when Ukraine wins its claims related to Russia’s invasion and occupation of Crimea.
Ukraine , the US the EU, Canada and other countries have denounced Russia's annexation of Crimea as illegal. Decisions of the Stockholm Arbitration Tribunal and the Permanent Court of Arbitration will be enforceable in jurisdictions that respect the rule of law and which aspire to a well-regulated global energy market. The decision of the Ukrainian courts should be adhered to as well in other jurisdictions because the monopolistic practices of Gazprom are undeniable – even the EU has mooted going after the Gazprom criminal monopoly, but political interference from some EU member states forestalled action. The point is that when Ukraine goes after Gazprom in European courts for the seizure of Gazprom assets it will likely get a favourable hearing.
Ukraine is practicing careful diplomacy and rigorous prosecution of international law and is winning the gas war that Russia started. Gazprom has against it so many fines and punitive awards and claims for damages that it may be that the Russian state-owned gas company is effectively bankrupt.
If there is to be any justice, Ukraine should seize assets of Gazprom in Germany next. Ukraine has the legal means to deal the death blow to the odious Nord Stream 2 project – and guarantee the energy security of Europe despite the perfidy of the German government which is for the moment dealing with the enemy by appeasing Russia and Gazprom. Forbes estimated that Gazprom had a market capitalization of $51.8 billion as of May 2017. Ukraine has justifiable claims against one-third of all of that value. The criminal monopoly Gazprom has picked a fight against the Ukrainian people who are on the side of the right and the good … and Russia’s gas weapon against Europe is failing very, very badly.