October 16, 2013

Ukraine Should Not Ventilate a Fair Price of Russian Gas in Stockholm...

Some Ukrainian politicians and experts recommend the Ukrainian state in the face of “Naftogaz of Ukraine”, often simply call on it to apply to Stockholm Court and seek to reduce the price of natural gas supplied to us by the Russian side on the contract of January 19, 2009, signed between the Russian LLC “Gazprom” and Ukrainian “Naftogaz of Ukraine”.

Why to the Stockholm Court, and not to any other, for example, the London one? It is quite understandable, because this Court, Stockholm one, is written in the contract (with the consent, by the way, of the Russians themselves). But then why, for example, not the Moscow Court? Besides, more than in 15 cases Western European firms in the previous and current years won similar cases at the Stockholm Court and managed to reduce gas prices.

Most of the Russians already at the time of the trial, agreed with the plaintiff, and the decision of the Court was announced “with the consent of the parties”.

That's why recommendations and calls to go to this court seemed quite logical and fair. Then why has the Ukrainian side not appealed to the Stockholm arbitration? After all, both, the former Ukrainian President Viktor Yushchenko and current President Viktor Yanukovych, looked at the contract from this point of view. Moreover, even the present head of the state during his presidential campaign in 2009, categorically promised reduction of this price. Like, with the Russians, he would fix the problem. After all, only “poperedniki” (predecessors) (as the Ukrainian Prime Minister calls them) could not reach an agreement with the Russians...

But it turns out that, as of the beginning of October 2013, the current powers that be are not yet in a position to negotiate on equal terms with other countries, — with the Russian leadership included. Therefore, they were quick to invent different, so-called alternative gas supply routes.

At this, not even half a word of the obvious truths — about the need to reduce gas consumption. And if they do say something, then only meaning ordinary Ukrainians. But, God forbid, to mention oligarchs, “swallowing”  most of the natural gas.

Comparison of energy intensity of GDP of different countries
Comparison of energy intensity of GDP of different countries http://gazeta.zn.ua/

Our state consumes annually 50 to 60 billion cubic meters of gas. The neighboring Poland, for example, with the GDP three times higher than ours, uses only 14 to 16.

Is the reduction of consumption not being mentioned just in order not to offend the oligarchs, squeezing for themselves the last private dollars from the Soviet make enterprises of Ukraine, and who would not even hear about modernization of these enterprises? (When I was working with the previous President of Ukraine, I used to prepare and send to the then Ukrainian Prime Ministers presidential letters urgent recommendations to encourage a total restructuring of our Ukrainian economy, not the one of the non-existent Soviet Union. And was getting phone calls with roughly the following responses, “Let your president breaks pots (quarrels) with oligarchs, I will not do that. I will not quarrel with them because of the calls for reforming and refocusing their businesses”).

Dynamics of gas consumption by the main users
Dynamics of gas consumption by the main users http://gazeta.zn.ua/

Later, after the signing of contracts for the import and transit of Russian natural gas on the 19th January, 2009, the author of these lines, carrying out the order of the then Head of State to reduce the inflated prices of Russian gas, consulted with many working in Kiev and Europe lawyers (Ukrainian, from EU countries, Russian and other experts in international commercial law included). In particular, I was trying to find out what were the prospects of Ukraine in case of our appeal to the Stockholm arbitration concerning unfair contracts, in particular, in relation to an overpayment for gas, which exceeded the European market prices? I must say that NOT A SINGLE LAWYER, having read the contracts, guaranteed that Ukrainian companies would win at the Court. On the contrary, the majority stated that the contracts had been written so intricately (they had been written by Russians, without participation of Ukrainians!), that, actually, they leave no chance for the Ukrainian side to break them or to reduce gas prices, without the consent of the Russian side. And again, no one (even some heads of other states) (!)  officially showed just for pure comparison,  nor did they agree to show at the court, the contracts of other parties at the excuse of those documents being a  “trade secret.”

So it turns out that the advice to seek fair prices in Stockholm are reduced to “show for the sake of show”, without any guarantee of success?

Then does Ukraine need it? Our fiasco in the Stockholm Court will only provoke Russia and at the same time will humiliate our state. Is not that what advisers want?

It is with this reasoning that the President of Ukraine decided then not to initiate an application to the Stockholm arbitration. I think that something like that has befallen our current head of state too, although he really wanted to show everyone that his  was “not light running” and he did get, as he promised to Ukrainians during his election campaign, a lower price for Russian gas imports. He promised, but he did not keep his word!

It would be, at least, strange if the same lawyers who in 2009 were proving the futility of the claim and who today consult the President of Ukraine and various politicians, today would have changed their opinion on the legal perspective of the gas contracts. In that case, I would like to find out, in particular, the following: when were you, Sirs Lawyers, sincere — then, in the 2009, and today, in 2013?

Or is this the legal component of the special operation against Ukraine?