Naftogaz Targets Russia With New $5.2 Billion Lawsuit

Ukraine’s state oil and gas company Naftogaz Ukrainy has filed a lawsuit against the Russian Federation for assets that the latter seized after its annexation of Crimea in 2014. The Ukrainian company is seeking US$5.2 billion in compensation.

The suit was filed with the Permanent Court of Arbitration at the Hague and, according to a statement by Naftogaz, the ruling will come no sooner than the end of 2020.

According to the company, “Naftogaz owned the most valuable energy assets in Crimea and was one of Russia’s main targets when it confiscated Ukrainian assets after the unlawful invasion and occupation of the peninsula in 2014.”

Russia annexed Crimea in the spring of 2014 following a referendum that Ukraine and the EU slammed as illegitimate. Since then, relations between the two neighbours have deteriorated.

In energy, the most notable Russian-Ukrainian dispute is no doubt the Naftogaz-Gazprom saga, in which both sides accused each other of violating contractual obligations.

In March last year, the Stockholm Court of Arbitration finally ruled in favour of the Ukrainian company. That victory was pyrrhic, however: of the original US$4.63 billion in payments due by Gazprom, the Stockholm court ruled that only US$2.56 billion would actually be paid out to Naftogaz, as Naftogaz had previously been ordered to pay about $2 billion to Gazprom for arrears. The court also obliged Naftogaz to buy 5 billion cubic meters of natural gas from the Russian company annually starting this year.

Gazprom acknowledged the ruling, but said it created a “material imbalance, which infringes the basic principles of Swedish law, which regulates the (gas) contract” adding that “Gazprom will defend its rights by all available means in accordance with the applicable law.”

At the moment, the two are negotiating their new gas transit contract that should enter into effect next year.