Ukraine Fines Russia's Gazprom $3.4 Billion for Abusing its Market Position
January 22 2016 - 9:42AM
Dow Jones News
By Miriam Malek and Kevin Baxter
Russia's state-owned gas company Gazprom has been slapped with a
fine worth around $3.4 billion for abusing its dominant market
position in Ukraine, according to a social media post from Yuriy
Terentyev, Chairman of the Antimonopoly Committee of Ukraine.
The committee couldn't be reached immediately to confirm the
information. A person familiar with the matter said Gazprom hadn't
been formally notified of the 85 billion Hyrvnia fine yet and there
had been no official contact between the two parties.
Maxim Moshkov, a Russia-based oil and gas analyst at UBS, said
he had heard about the situation but was struggling to see how such
a fine could be imposed since there was a binding gas contract in
place between Gazprom and Ukraine.
"I am not lawyer, but a contract is a contract," he said. "If
[Kiev] has signed a deal to buy Gazprom's gas then I find it
difficult to work out how they can then impose this levy."
Mr. Moshkov believes the underlying problem could stem from the
fee Ukraine is paid for transporting Russian gas across its
territory to European consumers. About 50 billion to 60 billion
cubic meters of gas a year is transported through a 1,240 kilometer
pipeline network across Ukraine. Under the current agreement this
has generated fees of about $1.7 billion a year.
The fee is based on the volume transported, the distance and the
current gas price, a calculation that means the levy has recently
dropped by about $170 million. Mr. Moshkov believes this won't have
been received well in Kiev and could lead to problems in the run up
to renewal talks in 2019.
Gas disputes between Ukraine and Russia have been ongoing since
2005. There is an outstanding claim from Gazprom against the
Ukraine for failing to pay for gas it refused to take in the third
quarter of 2015. Gazprom invoked the take-or-pay obligations on
Ukraine's state-owned natural gas company, Naftogaz's, which landed
it with $2.5 billion in fines. Earlier this week Naftogaz claimed
the charges were "not market based, invalid and inapplicable."
"It really is in no party's interest to bring about yet another
gas crisis," said Investcafe's Gazprom analyst Grigoriy Birg.
"Russia needs to be seen as a stable supplier of gas to Europe in
the face of growing efforts to diversify away from Russian natural
resources."
-Write to Kevin Baxter at kevin.baxter@wsj.com
(END) Dow Jones Newswires
January 22, 2016 09:27 ET (14:27 GMT)
Copyright (c) 2016 Dow Jones & Company, Inc.
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