Page 8 - Euroil Week 03 2020

EurOil COMMENTARY EurOil
steps towards upholding their end of the bar- gain. The Iranians have also indicated that the return of UN sanctions would lead them not just to abandon the JCPOA but to withdraw from the nuclear non-proliferation treaty (NPT) – a step that would likely not only push Iran further into the diplomatic cold but also place an obstacle in the way of future talks.
Still, with the dispute resolution process now underway, Europe should work three tracks in parallel. With the Iranians, the Europeans should underscore a key point in their joint statement: that their resort to the mechanism is a means for intensified diplomacy. If Iran refrains from further breaches to the agreement, the process, which theoretically could lead to UN sanctions within 65 days, can be extended. Among them- selves, France, Germany and the UK can step up efforts to put INSTEX into effect, and put in place additional means of boosting trade with Iran, which probably requires a certain degree of US acquiescence and European willingness to stand up to pressure from Washington.
While Washington will likely seize on the dispute resolution decision to exert pressure on the Europeans into further isolating Tehran, the latter can instead make the point to the Amer- icans that nearly two years of coercive policies have neither curbed Iran’s regional influence nor yielded an improved nuclear deal.
There is a risk that by triggering the resolution mechanism, the E3 countries could be embark- ing on a path that accelerates the crisis they are seeking to prevent. Their priority should remain an extension of the timeframe provided by the mechanism to seek to convince Iran to resume compliance with the JCPOA in exchange for meaningful economic reprieve. Ultimately, none of the agreement’s signatories are fully satisfied with the existing agreement. But building on it, rather than watching it collapse, should be the way forward.
A response from Iran to the European deci- sion is awaited with a mixture of trepidation and hope; in the present prevailing political climate it is very difficult to predict what this may be.™
PIPELINES & TRANSPORT
Greek gas importer wins legal dispute with Turkish supplier
GREECE
The award draws a line under a ten-year dispute over gas supplies.
GREEK gas utility DEPA has claimed victory in an arbitration case against Turkish counterpart Botas over gas supplies, drawing a line under a decade-long dispute.
The International Court of Arbitration (ICC) in Paris ruled last week that Botas should retro- actively cut the contractual price it has charged DEPA for gas, the Greek firm said in a statement.
“This decision is the final step in a 10-year trade dispute,” DEPA said, without revealing details of the verdict. The company said it was currently assessing the impact of the legal win.
Botas supplies DEPA with around 0.7-0.9bn cubic metres per year of gas it buys from Azerbai- jan, under a long-term contract reached in 2003. It opened a case against the Greek firm at the ICC in 2009, demanding that it pay €300mn ($332mn) for reportedly failing to meet its take-or-pay com- mitment. A take-or-pay clause in a supply contract requires a buyer to pay for gas supplies regardless of whether it takes them or not, or face a fine.
The ICC subsequently issued a €180mn award to Botas. But DEPA later lodged its own claims over what it described as unfair pricing since 2011. The verdict last week will see Botas retroactively apply a price cut from this year, a source told Reuters.
While details have not been disclosed, even a modest price revision would mean Botas forking
out tens of millions of euros in compensation to DEPA. The award comes at a fortunate time for Greece, which has recently broken up DEPA and is preparing to sell off a majority stake in its wholesale and retail activities this month. The government has also launched a tender for 100% of its distribution network.
DEPA also has long-term contracts for gas supply with Russia’s Gazprom and Algeria’s Sonatrach. It is currently in talks with Gazprom to remove the take-or-pay clause in their con- tract, while also seeking a price reduction from Sonatrach for LNG.
DEPA’s contract with Botas is due to expire in 2021, after which point it intends to buy gas directly from Azerbaijan via the nearlycompleted Southern Gas Corridor (SGC) network. The country is also building a second LNG import terminal to diversify its supply even further.™
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Week 03 23•January•2020