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29th May 2022

EU fears new Russia gas crisis, amid court disputes

  • Gazprom facility in Russia: Moscow turned off EU gas transit via Ukraine for 13 days in 2008/2009 crunch (Photo: gazprom.com)

Russia must pay Ukraine $2.6bn [€2.4bn] in a long-running gas dispute, a Swedish court has said, in a ruling that could lead to a repeat of the 2009 winter gas crisis in the EU.

The Svea County Court of Appeal in Sweden issued its verdict on Wednesday (27 November), after Russian gas supplier Gazprom had challenged an earlier pro-Ukraine ruling in 2017 by an arbitration tribunal in the Stockholm Chamber of Commerce.

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The two verdicts were part of a series of ongoing legal disputes worth tens of billions of euros.

Most of them arose from a controversial, 10-year gas contract signed in January 2009 by Ukraine's then prime minister, Yulia Tymoshenko, in Moscow which forced Ukraine to pay for set volumes of gas from Russia no matter how much gas it took in reality.

"Full victory! Ukraine is winning again!", Yuri Vitrenko, a senior executive at Ukraine's gas transit firm, Naftogaz, said on Facebook on Wednesday.

But the Tymoshenko gas contract expires on 31 December this year and Russia has threatened to halt gas supplies to Ukraine unless it drops its legal battles.

"There is undoubtedly a need to fully resolve all court disputes before signing a new contract," Gazprom CEO Alexei Miller said last week, calling for them to be "settled out of court".

"The risk of termination of transit exists" and the prior Swedish verdicts were "nonsense" that were "making the situation worse," Russian president Vladimir Putin also said.

Ukraine currently transits about 87 billion cubic metres (bcm) of Russian gas to EU countries out of Russia's total 200bcm European exports.

The last time Russia and Ukraine seriously fell out on gas, in winter 2008/2009, it wreaked havoc, including some blackouts in EU states, such as Bulgaria, Hungary, Poland, and Slovakia, which are heavily dependent on Russian gas coming via Ukraine.

"I've been involved in mediation processes since I was young, including in African matters. It's the first time I saw agreements that were systematically not respected," the then European Commission president Jose Manuel Barroso said at the time.

"This very peculiar episode is over. Let's hope it's over," Barroso added.

The gas has kept flowing in recent years despite Russia's invasion of Ukraine in 2014, just as it did during the Cold War, making billions of euros for the Russian and Ukrainian treasuries.

Eastern EU states have also built "interconnector" pipes, liquid gas terminals, and extra storage facilities to help prevent a repeat of the 2008/2009 situation.

"Europe is getting ready for a crisis. We do not know what will happen on 1 January, but we will be prepared," Maciej Wozniak, the deputy head of Polish gas distributor PGNiG, said in Warsaw last week.

He showed press a map of storage levels in Austria, the Czech Republic, Germany, Hungary, Poland, Slovakia, and Ukraine, the Reuters news agency reported.

"We call it a map of fear, as we have not seen such storage levels for years," Wozniak added.

The commission has also tried to mediate between Kiev and Moscow, the same way Barroso did back in 2008.

But the last so-called 'trilateral' meeting, on 1 November, left commission vice-president Maroš Šefčovič feeling "disappointed".

"Time is flying and given the date, there is - and there must be - a clear sense of urgency," he said.

A new EU winter gas crunch aside, the Russia-Ukraine transit talks come amid wider strategic concerns on European energy supplies.

Russia is currently building two new pipelines to the EU via the Baltic Sea and the Black Sea that could make Ukraine's transit network obsolete in 2020.

That, in turn, could destabilise the Ukrainian economy by costing it some $3bn a year in lost transit fees and make EU states such as Poland more vulnerable to Russian energy blackmail.

It could also pave the way for wider Russian military aggression in Ukraine, the Ukrainian military says, because Russia would have nothing to lose if fighting destroyed the Ukrainian transit pipes.

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