Ukraine Court rebuffs Gazprom fine appeal

Charges Russian gas giant cut gas flow

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The Supreme Economic Court of Ukraine on July 13 reportedly dismissed Gazprom’s appeal against a $3.4 billion fine. In January, Ukraine’s Antimonopoly Committee (AMCU) fined the Russian gas monopoly for abuse of its dominant position in the country’s gas transit market.

AMCU has argued that Gazprom has reduced the volume of gas it transits through the former Soviet republic, undermining the transit contract with Russia. According to the terms of the agreement, Gazprom was obliged to pump about 100 billion cubic metres of gas in 2014 through Ukraine. Instead, the Russian company pumped only 62 billion cubic metres of gas. Naftogaz of Ukraine has estimated the lost revenue at $6 billion, according to RT.

Gazprom says it does no business in the country, as it gives the gas to Ukraine at Russia’s western border. The Russian gas giant claimed that Kiev is trying “to exert pressure” on Gazprom.

Gas price disputes between Moscow and Kiev resulted into Russia halting gas flows to Ukraine in 2006, 2009 and 2014.

Slava Smolyaninov, a strategist at BCS, a brokerage firm in Moscow, told New Europe on July 14 that another gas crisis this winter is nobody’s interest. “Looking strategic from the market standpoint, I don’t think it’s going to find any reflection on the capital markets in Russia this dispute,” he said.

Smolyaninov said the recent development between Gazprom and Naftogaz is “a negotiation tool rather than anything dramatic”.

“This year with the recent volatility both oil prices and gas prices, it’s really too early to call it a war or anything else. As far as I understand, Gazprom is more interested than any other party in supplying Europe and getting more gas out of Russia so I would expect that to be pretty smooth. Russia is not in a position and Gazprom is not in a position to twist arms and do things that they used to do them,” Smolyaninov said. “It’s a matter of price and prices have been extremely volatile this year.”

Ukraine has tried to reduce its reliance on Russian gas with reverse flows from Slovakia, Hungary and Poland while Gazprom wants to completely bypass Ukraine and has spearheaded the Nord Stream 2 and South Stream pipelines.

Meanwhile, Sputnik cited a Gazprom Export statement on July 14 that it will hold an auction from August 31 to September 2 on sales of Russian natural gas with deliveries in the 2016-2017-winter period.

“As during the first auction, which took place in September 2015, gas will be offered in the Greifswald, Gaspool and Olbernhau delivery points. In addition to the aforementioned areas, customers will be able to receive gas in the framework of the Baumgarten and Arnoldstein auction,” the statement read. Gazprom held the first natural gas sale auction in September 2015 to test the new trading mechanism for gas supplied over the Nord Stream-1 gas pipeline. Over 40 lots for 15 offtakers with the total volume more than 1.2 billion cubic metres of gas were sold.

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