Michael MacKay, Radio Lemberg, 07.03.2018
The Ukrainian government and Ukraine’s state-owned oil and gas company Naftogaz have won a huge victory over Russia and Gazprom. First, a tribunal of the Arbitration Institute of the Stockholm Chamber of Commerce awarded Naftogaz $2.56 billion to be paid by Gazprom, resolving a dispute over transit of Russian natural gas through transit pipelines in Ukraine. Then, after Gazprom dropped the input pressure of natural gas to the transit pipelines below the contractually-agreed level, Naftogaz came to the rescue of Moldovan and European Union customers by cutting domestic consumption and diversifying supply to meet delivery levels consistently. Russia completely failed in its gas war blackmail against Europe and ruined its reputation as a rules-abiding participant in the oil and gas trade. Ukraine won a major victory and burnished its reputation as the reliable “go-to” source and transit country for natural gas in Europe.
Ukraine cannot rest on its laurels, and Naftogaz is already taking steps to consolidate its victory in the gas war that Russia and Gazprom started.
Naftogaz has proven that it is a well-managed company that “does its homework” in multi-year disputes and arbitration hearings with Russia’s Gazprom. Now, Naftogaz will pursue a new dispute resolution with the Stockholm Arbitration Tribunal. Naftogaz believes that the tariff for transit of Russian gas through Ukraine was greatly understated in the contracts that were in place from 2009 to 2017. Naftogaz will argue in Stockholm that Gazprom owes the Ukrainian company $20 billion in unpaid costs. Yuriy Vitrenko, the commercial director of Naftogaz, said on ICTV channel: “The cost of transit through Ukraine is underestimated by a factor of two. We will try to prove it now. Since 2009 to the present, we have lost about 20 billion dollars.”
After Gazprom announced that it would unilaterally sever all contracts with Naftogaz, Naftogaz announced that it would close its representative office in Moscow. At the same time, Naftogaz announced that it would open a representative office in Germany. This is a wise move, as Ukraine’s victory in the gas war has started a shift in thinking in Germany away from a focus on Russia as an energy source and more towards Ukraine.
Ukraine can truly consolidate its victory over Russia in the gas war that Putin started by killing Nord Stream 2. The Nord Stream 2 pipeline is a scheme by the Putin regime to deprive Ukraine of gas transit revenue and to wreck the Ukrainian economy. Nord Stream 2 is also a scheme to wreck Europe’s energy security by making Germany a direct victim of Russia’s Gazprom weapon (without the mediation of responsible partner Naftogaz) and by making Germany more dependent on an undiversified source of natural gas in Russia.
Poland, Estonia, Latvia, Lithuania, Finland, Sweden, Norway, Denmark, Ukraine and a good chunk of European Union officialdom opposes the Nord Stream 2 scheme to destroy Europe’s energy security. Only some factions in the German, Austrian and French governments, and the companies Engie, OMV, Shell, Uniper and Wintershall support it. The Putin regime has staked everything on its gamble that Nord Stream 2 is the weapon that will allow Russia to complete the invasion, occupation, and annihilation of free and independent Ukraine.
When Nord Stream 2 is dead, Ukraine and the European Union will have won the gas war that Putin started. Only then will Ukraine and the rest of Europe be safe from the perpetual threat of freezing in the dark that comes from aggressor Russia.