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Ukraine’s Naftogaz Seeks $5.2 Billion In Damages From Russia Over Seized Crimea Assets

Naftogaz CEO Andriy Kobolyev (left) and Ukrainian Foreign Minister Pavlo Klimkin at a news conference.
Naftogaz CEO Andriy Kobolyev (left) and Ukrainian Foreign Minister Pavlo Klimkin at a news conference.

Naftogaz Group, Ukraine’s state-run oil and gas conglomerate, on July 31 filed a lawsuit for a $5.2 billion damage claim over assets that Russia seized during its annexation of Crimea in March 2014.

The Permanent Court of Arbitration in The Hague will hear the case and Naftogaz said in a statement that it expects a ruling “no sooner than the end of 2020.”

The lawsuit is based on a prior agreement between Ukraine and Russia to mutually protect each other’s investments.

After Russia took over Ukraine’s Crimean Peninsula, the occupying authorities started nationalizing local industrial assets, including the property of Naftogaz and its subsidiaries. They included pipelines, offshore oil rigs, and other assets.

Oschadbank, Ukraine’s second-biggest state-owned bank by assets, has already been awarded $1.3 billion in lost Crimean assets by the Paris-based International Court of Arbitration.

Moscow rejected the ruling.

In March 2018, the Stockholm Arbitration Court ordered Russia’s state-run Gazprom to pay $2.5 billion to Naftogaz over a contractual dispute involving the supply and transit of gas.

Gazprom appealed the ruling, whereas Naftogaz has sought to recover the money by freezing the Russian company’s foreign assets in Switzerland, Sweden, the Netherlands, Luxembourg, and Britain.

Russian natural gas pipelines in Europe
Russian natural gas pipelines in Europe

The long-running quarrel between Naftogaz and Gazprom is part of a broader geopolitical scuffle between Moscow and Kyiv, including Russia’s support of separatists in two easternmost regions of Ukraine, alleged cyberattacks, and information warfare.

Ukraine relies mostly on Russian gas imports that it purchases from its European Union neighbors via reverse flow pipelines.

Kyiv fears that it will be cut off from reverse supply routes once Russia’s Nord Stream 2 project goes online, which will bypass Ukraine as transit country for Russian gas to the EU.

The EU is pressing for a guarantee from Russia of a minimum volume of transit through Ukraine for an unspecified period of time after 2020.

Kyiv’s gas transit contract with Russia expires on December 31.

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