Naftogaz Takes Russia to Arbitration over 'Stolen Assets'

Naftogaz Ukrainy and six of its subsidiaries began arbitration proceedings October 17 against the Russian government to recover damages from what it called Russia’s “unlawful seizure of the group's assets in Crimea”. 

State-owned Naftogaz said October 19 it filed the arbitration claim under the Russia-Ukraine bilateral investment treaty, which it says requires Moscow to respect and protect Ukrainian-owned assets including those in Crimea. Its preliminary estimate of damages claimed is $2.6bn. 

Naftogaz alleges that Russia in 2014 “engaged in a widespread and well-orchestrated scheme to deprive Ukrainian companies of their property, without payment of compensation” and that Naftogaz owned some of the most valuable energy assets in Crimea and therefore a chief target.

Specifically it says Russia took formal steps to nationalise Naftogaz's oil and gas assets in Crimea, including by sending armed men to commandeer Naftogaz's drilling platforms, and ultimately transferring almost all of Naftogaz's Crimea-based assets to a Russian state-owned company.

The six Naftogaz subsidiaries involved are Chornomornaftogaz, Ukrtransgaz, Likvo, Ukrgasvydobuvannya, Ukrtransnafta, and Gaz Ukrainy.

Naftogaz is already in arbitration proceedings against Gazprom over a take-or-pay dispute for which it expects to hear a decision by March 2017; oral hearings on that case concluded in Stockholm a week ago. The post-hearing brief, when both sides submit their summaries, is expected in November and at the end of that month, hearings begin into the transit contract between the two sides. Naftogaz claims Gazprom is not shipping as much gas as had been agreed.  

Mark Smedley