On Wednesday, Stockton Arbitration ordered Gazprom to pay 2.56 billion United States dollars under the transit contract with Naftogaz Ukraine, but the company disagreed with the court decision and announced its intention to "protect its rights in line with the legislation it adopted".
But Russia's Gazprom gas giant unexpectedly refused to resume deliveries, returning the prepayment for supplies made by Kiev, claiming amendments to a contract had not been completed.
The Naftogaz head noted that the company expects to receive the sum of $2.56bn from Gazprom as soon as possible.
In a statement, Gazprom CEO Alexei Miller said the ruling meant the gas deals with Ukraine would no longer be commercially viable, so the company had no choice but to ask the court to terminate them. "This will improve security of supply and give Ukrainians affordable energy", Kobolyev added.
Gazprom and Naftogaz signed the current contract for the supply of gas to Ukraine in January 2009 and it is valid until December 31, 2019. Since that date, it has been buying gas from Western Europe in order to reduce its energy dependency on Russian Federation, according to Reuters.
Нафтогаз УкраїниVerified account @NaftogazUK
All of these terms relate to gas that Ukraine buys for its own use. The reason the volumes of contractual gas has been reduced to such a small amount is the take-or-pay provisions remain in place, but apply to only this vastly reduced volume of gas. Naftogaz wanted a retroactive price change starting from May 2011. What is unclear is how the transit deal will be affected by the row: Gazprom delivers some 80% of the approximately 110bcm of gas it sends to its Western European customers via the ironically named Druzhba, or "Friendship", pipeline that runs across Ukraine.
President Petro Poroshenko has stated that Ukraine has sufficient natural gas reserves in its underground storage facilities.
Gazprom demanded that Naftogaz should pay arrears for gas that had been supplied earlier. Of $17 billion (R202.82bn) claimed by Naftogaz, the court satisfied the claims for $4.673bn.
It noted the tribunal rejected the appeal by Naftogaz to increase the gas transit tariff and amend the contract to comply with Ukrainian law, suggesting a negotiation would be on the table.
Gazprom, obviously, will challenge the arbitration award.