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Russian Federation tells European Union gas supplies via Ukraine under no immediate threat

04 March 2018

Kiev and Moscow plunged into a new gas dispute on Thursday after Ukraine's Naftogaz demanded compensation for Gazprom's unexpected decision not to restart gas supplies. A legal dispute of Russia's gas giant Gazprom and Ukraine poses no risk to transit of gas from Russia to the European Union, which remains as reliable as earlier, a spokesperson for the Russian Energy Ministry told TASS on Saturday.

He also stressed that since March 1, gas supplies have not restarted.

It did not give further details.

Ukraine is the main route for the Russian gas to Europe where Gazprom accounts for around 35 percent of the market share.

A day after Gazprom was due to resume gas deliveries to Ukraine after a almost three-year hiatus, Russia's gas monopolist has thrown down the gauntlet, saying it will cancel its supply contracts to Ukraine's national gas company Naftogaz. The decision seriously violates the balance of interests of the parties under these contracts.

"The arbitrators explained their decision with the sharp deterioration in the state of the Ukrainian economy". Medvedev added that Gazprom received funds from the Ukrainian Naftogaz, but no additional agreement was made to the current contract. Kyiv has not bought any Russian gas at all since November 2015, replacing it with reverse-supplied Russian gas from Europe.

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Due to an emergency gas shortage, Ukraine's power plants must now use oil instead of gas. At the same time, the "take or pay" condition was preserved for 80% of this volume.

The court also ruled that part of the price Naftogaz was supposed to pay would be reduced.

Ukraine's state-owned gas pipeline operator Ukrtransgaz, however, said it had to take extra measures to ensure gas transit to its European customers.

President Petro Poroshenko has stated that Ukraine has sufficient natural gas reserves in its underground storage facilities.

Gazprom is unhappy with the ruling, which requires it to pay Naftogaz $2.56 billion in net damages for underpayments and under-deliveries under the 10-year contract that runs to end-2019.

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.

Russian Federation tells European Union gas supplies via Ukraine under no immediate threat