Page 11 - FSUOGM Week 07 2020

FSUOGM POLICY FSUOGM
Naftogaz seeks $8bn for Crimean assets
UKRAINE
Naftogaz’s Crimean claims are not connected with a settlement deal reached with Gazprom in late 2019.
UKRAINIAN gas rm Na ogaz is now seeking $8bn from Russia in compensation for the sei- zure of its assets in Crimea in early 2014.
Na ogaz settled all its long-standing disputes with Russian counterpart Gazprom at the end of last year as part of a broader agreement on con- tinued Russian gas transits via Ukraine. But Naf- togaz is still demanding redress from the Russian Federation for Crimean losses.
Na ogaz said in a statement on February 17 that, together with six of its subsidiaries, it had led new arbitration materials to the Hague Permanent Court of Arbitration, valuing damages from sei- zures plus interest at around $8bn. e company said in July last year its claim was worth $5.2bn.
e assets in question include two recently purchased drilling rigs worth $400mn and equipment Na ogaz had stationed on Crimea at the time of the annexation, as well as local infrastructure such as pipelines and gas storage facilities.
Russia also took control of several gas elds o Crimea operated by Na ogaz, putting an end
to Ukraine’s ambition of developing offshore resources. Some of these elds were already in production, owing 1.65bn cubic metres of gas in 2013. Output had been projected to reach 3 bcm by 2015.
Naftogaz secured a key victory in March last year, when the Hague court ruled that Rus- sia’s seizures were unlawful, violating the Rus- sia-Ukraine bilateral investment treaty. But the court is yet to decide how much Na ogaz should be awarded in compensation.
Russia has dismissed the case as meaningless, arguing that the Hague lacks jurisdiction.
“Despite Russia’s appearance in the arbi- tration in January 2017, it refused to actively participate in the proceedings for nearly three years,” Na ogaz said. “Instead, Russia argued that it owes Na ogaz nothing despite Russia not disputing that it unlawfully expropriated Na o- gaz’s assets.”
A nal hearing on Na ogaz claims is sched- uled for May 2020, the company said, with a nal award anticipated in mid-2021. ™
Dutch court reinstates $50bn Yukos award
RUSSIA
Most of Yukos’ assets fell into the hands of Rosneft.
A Dutch appeals court has ordered the Rus- sian government to fork out $50bn to former shareholders of defunct Russian oil giant Yukos, marking another twist in a more than decade-old legal battle.
e latest ruling overturns a previous verdict by a lower court. Russia has said it will le an appeal, setting the stage for a showdown at e Netherlands’ Supreme Court.
Yukos was once Russia’s biggest oil producer and brie y its most valuable company, having accumulated a number of major Siberian oil- elds during privatisation deals in the 1990s, including the controversial loans-for-shares scheme. The company’s fortunes changed in 2003, when the government accused it of owing $27bn in back taxes. In October of that year its owner Mikhail Khodorkovsky, once Russia’s richest man, was arrested on charges of fraud and placed in prison.
Moscow is widely seen to having instigated Yukos’ downfall to order to reassert its control over the oil industry. Specifically, the Krem- lin objected to Khodorkovsky’s plans to build a privately owned oil pipeline from Siberia to northern China that the state considered the pre- rogative of the government and foreign policy. Khodorkovsky was also accused of bribing many deputies in the Duma and Federation council to give him in uence over the political process.
The company’s assets were sold at bank- ruptcy auctions, with many falling into the hands of Russia’s national oil company Rosne .
e Permanent Court of Arbitration of e Hague in 2014 concluded that the Kremlin had staged a co-ordinated attack on Yukos in order to bring its assets back under state control, ordering Russia to pay $50bn in compensation to shareholders. Two years later, however, the District Court of the Hague overturned this rul- ing, claiming the arbitration judges had no juris- diction in the case as Russia never rati ed the Energy Charter Treaty protecting international investment.
However, e Hague Court of Appeal ruled on February 18 that the 2016 decision “was not correct. at means that the arbitration order is in force again.”
“ is is a victory for the rule of law,” GML, a pension fund made up of former Yukos share- holders, said in a statement. “ e independent courts of a democracy have shown their integrity and served justice. A brutal kleptocracy has been held to account.”
Russia’s Justice Ministry announced Mos- cow’s intention to appeal, saying that appeals court had “failed to take into account the illegit- imate use by former Yukos shareholders of the Energy Charter Treaty that wasn’t rati ed by the Russian federation.” ™
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