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Ukraine loses gas dispute to Russia; ordered to pay $2 billion to Gazprom

Contrary to Ukrainian claims Stockholm Arbitration Court finds in Gazprom’s favour in dispute about gas sales and prices

Alexander Mercouris

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On Friday 21st December 2017 the Stockholm Arbitration Court made a ruling in the legal dispute between Ukraine’s state owned gas monopoly Naftogaz and Russia’s largely state owned gas monopoly Gazprom.

In the hours after the decision – which like all decisions of the Stockholm Arbitration Court – is not published, Naftogaz claimed victory in a short statement.  However over the course of the hours which followed Gazprom provided details of the decision which suggests that the truth is the diametric opposite.

Here is how the Financial Times reports the competing claims

Both Ukraine’s Naftogaz and Russia’s Gazprom both on Friday claimed victory as a Stockholm arbitration tribunal issued the final award ruling in the first of two cases in a three-year legal battle between the state-controlled energy companies, where total claims stand at some $80bn.

An emailed statement from the Ukrainian company was titled:

“Naftogaz wins the gas sales arbitration case against Gazprom on all issues in dispute.”

The Stockholm arbitration tribunal — in its final award ruling in a dispute over gas supplies from prior years — had, according to Naftogaz, struck down Gazprom’s claim to receive $56bn for gas contracted but not supplied through controversial “take-or-pay” clauses. They were included in a supply contract Ukraine signed in 2009 after Gazprom dented supplies to the EU by cutting all flow amid a price dispute— including transit through the country’s vast pipeline systems. In a tweet Ukraine’s foreign minister

Pavlo Klimkin wrote: “The victory of Naftogaz in the Stockholm arbitration: It’s not a knockout, but three knockdowns with obvious advantage.”

But later Gazprom countered that arbitors “acknowledged the main points of the contract were in effect and upheld the majority of Gazprom’s demands for payment for gas supplies”, worth over $2bn. A Naftogaz official responded that the company never refused to pay for gas supplied, but challenged price and conditions.

Given the tribunal does not make its decisions public, doubt loomed over which side was the ultimate winner. Anticipation also grew over the second and final tribunal award expected early next year over disputes both have concerning past gas transit obligations.

Friday’s final Stockholm arbitration ruling follows a preliminary decision from last May after which both sides were given time to settle monetary claims outside of the tribunal but failed to reach agreement.

Here is the full Naftogaz statement:

“Today, the Tribunal at the Arbitration Institute of the Stockholm Chamber of Commerce has completely rejected Gazprom take-or-pay claims to Naftogaz amounting to USD 56 billion for 2009-2017.

– Naftogaz succeeded at reducing future contract volume obligations by more than 10 times and made them relevant to its actual import needs.

– Price for gas off-taken by Naftogaz in 2Q 2014 reduced 27% from USD 485/tcm to USD 352/tcm. – Naftogaz saved USD 1.8 billion on gas purchased in 2014-2015 due to revision of the contract price.

– Destination clause and other discriminatory provisions were declared invalid to bring the contract in line with current European market standards.

– Naftogaz estimates the total positive financial effect of the arbitration over the lifetime of the supply contract at over USD 75 billion.

– Naftogaz claims up to USD 16 billion in transit contract arbitration against Gazprom; decision expected on 28 February 2018.”

Gazprom said that in a separate decision on May 31 of this year, the tribunal denied Naftogaz’s application to review prices from May 2011 to April 2014, ordered it to pay $14bn for gas supplies during that period, and said that the take-or-pay conditions applied for the duration of the contract. Gazprom claimed that Naftogaz would have to pay it $2.18bn plus interest of 0.03 per cent for every day the payments were late, and then pay for 5bn cm of gas annually starting next year.

When the different sides give opposite accounts of the same decision it obviously becomes difficult to say what the real decision actually is.  However Gazprom says that the court upheld (1) the main provisions of the contract; (2) the contract’s take-or-pay provisions, these being a particularly contentious issue in the contract; and (3) that Naftogaz has been ordered to pay Gazprom $2 billion, presumably immediately, with interest for every day the amount is unpaid.

By contrast the reduction in the gas price Naftogaz refers to from $485/tcm to $352 tcm which Naftogaz makes much of in its statement appears to apply only to gas supplied to Ukraine by Gazprom in the second quarter of 2014 and still sets the price of gas supplied to Ukraine by Gazprom higher than was demanded by Ukraine during this period.

The key point here is that Russia agreed to reduce the price of gas supplied to Ukraine by an agreement Russia’s President Putin reached with Ukraine’s President Yanukovich in December 2013.  After the Maidan coup the new Ukrainian government went back on the agreement causing the Russians to demand payment of the original price.  However over the course of 2014, as energy prices began first to slide and then crashed, and as it became clear that Ukraine was simply not paying for its gas, Russia again reduced the price of the gas Ukraine had to pay.

What seems to have happened is that the Stockholm Arbitration Court decided to smooth out the price of gas payable by Ukraine throughout 2014, which is the sort of thing arbitration tribunals are regularly known to do, whilst leaving the essentials of the contract unchanged.

If so then this is not a victory by Ukraine but a clearcut defeat, which Naftogaz and the Ukrainian government have tried to spin into a victory by citing the reduction in the gas price in the second quarter of 2014 and the reduction in future gas import volumes, neither of which were contentious issues.  By contrast it is clear that Ukraine and Naftogaz must pay the full contractual price and abide by the contract’s take-or-pay provisions for the whole of the period of the contract prior to the second quarter of 2014.

What this means in terms of hard cash is that Ukraine must now pay Russia a further $2 billion on top of the $3 billion it was recently ordered to pay by the High Court in London.  Just as it is holding back on paying the $3 billion it was ordered to pay by the High Court until the appeal process in London is finished, so it will try to hold off paying the $2 billion it has just been ordered to pay to Gazprom until the final decision of the Stockholm Arbitration Court (thus the brave talk of Naftogaz’s claims of “up to $16 billion transit contract arbitration against Gazprom”) but thereafter payment of the $2 billion will fall due.  I say this because the claim Gazprom owes Naftogaz “up to” $16 billion in transit fees looks like it has been plucked out of the air.

What this means is that over the course of 2018 Ukraine will have to pay Russia $5 billion ($3 billion awarded by the High Court in London and $2 billion awarded by the Stockholm Arbitration Court).  Since the $2 billion awarded by the Stockholm Arbitration Court is technically an arbitration award, Gazprom will need to convert it into a court Judgment before it can enforce it, but that is merely a formality.  At that point this debt will become not merely due but legally enforceable as well.

Ukraine recently borrowed $3 billion on the international financial markets at very high interest almost certainly in order to pay the $3 billion the High Court in London has ordered it to pay Russia. Whilst the $2 billion is technically a debt owed by Naftogaz not Ukraine and its non-payment would does not place Ukraine in a state of sovereign default, Gazprom is in a position to enforce the debt against Naftogaz’s assets (including gas it buys) in the European Economic Area.  It is difficult to see how Naftogaz and Ukraine can avoid payment of this debt.

Has Ukraine actually gained anything from its long running gas dispute with Russia?

Naftogaz brags that Ukraine has saved up to $75 billion because it is no longer buying gas from    Russia.  However this begs the question of whether the gas Ukraine is now importing from Europe really is significantly cheaper than the gas Ukraine was buying from Russia?   This is debatable and with energy prices rising it is likely to become even less likely over time.

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Surprise, Surprise! Another Brett Kavanaugh Sexual Assault Allegation! (Video)

Democrats will use this Social Justice tactic on every nomination and election.

The Duran

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Via Stefan Molyneux


Surprise, Surprise! Fresh off the spineless Republicans delaying the confirmation vote for Supreme Court Nominee Brett Kavanaugh – the Judge has been accused of yet another sexual assault claim of questionable authenticity. Apparently during the 1983-84 academic school year, Kavanaugh ‘exposed himself’ to classmate Deborah Ramirez while she was heavily intoxicated – or so she thinks so, despite admitted gaps in her memory and no additional eyewitnesses.

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White House Releases Late Night Push Back to New Yorker Hit on Kavanaugh

Ramirez recalls “a penis being in front of my face,” and that despite being incredibly drunk, someone encouraging her to “kiss it.”

The Duran

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Via The Gateway Pundit


The White House released a late night response to the New Yorker hit piece by Ronan Farrow and Jane Mayer on Supreme Court nominee Brett Kavanaugh in which a Yale classmate alleged, without eyewitness corroboration, that Kavanaugh exposed himself to her face at a drunken college dorm party decades ago. Kavanaugh issued a statement denying the accusation.

Latest Kavanaugh accuser, Yale classmate Deborah Ramirez.

The White House statement highlights multiple details from the article that undermine the accusation.

Reporters have posted a copy to Twitter, one of them CNN’s Kaitlan Collins.

Full image and text posted below.

WHAT YOU NEED TO KNOW ABOUT THE ALLEGATIONS MADE IN THE NEW YORKER ARTICLE ON JUDGE BRETT KAVANAUGH

“This alleged event from 35 years ago did not happen. The people who knew me then know that this did not happen, and have said so. This is a smear, plain and simple. I look forward to testifying on Thursday about the truth, and defending my good name—and the reputation for character and integrity I have spent a lifetime building—against these last-minute allegations.” – Judge Brett Kavanaugh

The accuser, Deborah Ramirez, admits in The New Yorker’s piece that there were “significant gaps” in her memories about the event. 

  • “She was at first hesitant to speak publicly, partly because her memories contained gaps because she had been drinking at the time of the alleged incident.”
  • “Ramirez acknowledged that there are significant gaps in her memories of the evening…”

By The New Yorker’s own admission, Ramirez was reluctant to speak with certainty on the allegation. 

  • “In her initial conversations with The New Yorker, she was reluctant to characterize Kavanaugh’s role in the alleged incident with certainty.”

It took six days of “assessing her memories” for Ramirez to say she recalled Kavanaugh committing the alleged incident, and that came only after consulting with an attorney provided by the Democrats. 

  • “After six days of carefully assessing her memories and consulting with her attorney, Ramirez said that she felt confident enough of her recollections…”
  • “Senate aides from Ramirez’s home state of Colorado alerted a lawyer, Stanley Garnett, a former Democratic district attorney in Boulder, who currently represents her.”

The New Yorker admits it has not confirmed through eyewitnesses Kavanaugh was even present at the party and other students who knew Kavanaugh said they never heard of the incident. 

  • The New Yorker has not confirmed with other eyewitnesses that Kavanaugh was present at the party.”
  • “In a statement, two of those male classmates who Ramirez alleged were involved in the incident, the wife of a third male student she said was involved, and three other classmates, Dino Ewing, Louisa Garry, and Dan Murphy, disputed Ramirez’s account of events…”
  • “We were the people closest to Brett Kavanaugh during his first year at Yale. He was a roommate to some of us, and we spent a great deal of time with him, including in the dorm where this incident allegedly took place.”
  • “Some of us were also friends with Debbie Ramirez during and after her time at Yale. We can say with confidence that if the incident Debbie alleges ever occurred, we would have seen or heard about it—and we did not.”

Further, those classmates said that the allegations in the story would be completely out of character for Kavanaugh.  

  • “The behavior she describes would be completely out of character for Brett.”

A former student who was best friends with Ramirez said she never told her about the incident despite how close they were. 

  • “The former friend who was married to the male classmate alleged to be involved, and who signed the statement, said of Ramirez, ‘This is a woman I was best friends with. We shared intimate details of our lives. And I was never told this story by her, or by anyone else. It never came up. I didn’t see it; I never heard of it happening.’”

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US Will Be “Defenseless” Against New Russian Nuclear Sub Equipped With Hypersonic Missiles

The hypersonic nuclear submarine is not the only super-weapon that Russia is preparing to add to its arsenal.

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Via Zerohedge


The Soviet-era arms race between the US and Russia is officially back on.

To wit, Moscow is reportedly building a fleet of nuclear submarines armed with hypersonic ICBMs capable of delivering a nuclear payload ten times larger than the bomb dropped on Hiroshima, according to CNBC, which cited a US intelligence report on the new weapons. Russian President Vladimir Putin hinted at six new super weapons during a speech back in March where he also revealed that Russia is working on a nuclear missile capable of evading NATO’s ring of ABM defenses.

The new Borei II submarine, also known as the Borei-A, is a fourth-generation nuclear-powered ballistic missile submarine that will reportedly join the Russian Navy’s Northern and Pacific Fleets once it’s completed in 2024, according to the report. Each sub can carry up to 20 Bulava intercontinental ballistic missiles, which can deliver a nuclear payload of 100 to 150 kilotons. The sub will be the first new Russian sub developed in the post-Soviet era.

What’s worse is that, as of now, the US doesn’t possess adequate defenses to protect against Bulava missiles.

What’s more, unlike a traditional missile, which carries one warhead, the Bulava missile is capable of carrying up to 10 nuclear and hypersonic weapons on its tip. That means one Borei II submarine could potentially launch 200 hypersonic weapons, a threat the U.S. is currently unable to defend against.

A hypersonic weapon can travel at Mach 5 or higher, which is at least five times faster than the speed of sound. This means that a hypersonic threat can travel about one mile per second.

Back in March, Putin showed a digital representation of how one of Russia’s new weapons could evade ABM defenses by traveling high into the stratosphere. The Russian president also criticized the US and NATO for forcing Russia to resort to these weapons. He also dared any of Russia’s geopolitical rivals to call the country weak.

“I want to tell all those who have fueled the arms race over the last 15 years, sought to win unilateral advantages over Russia, introduced unlawful sanctions aimed to contain our country’s development: You have failed to contain Russia,” Putin said during his March national address.

A hypersonic weapon can travel at Mach five or faster, which means it is five times faster than the speed of sound, traveling at about one mile per second.

And the new sub isn’t the only super-weapon that Russia is preparing to add to its arsenal. Of the six weapons Putin unveiled at his speech earlier this year, CNBC reported that two of them will be ready for war by 2020.

“We don’t have any defense that could deny the employment of such a weapon against us,” Air Force Gen. John Hyten, commander of U.S. Strategic Command, told the Senate Armed Services Committee in March, following Putin’s comments.

With this in mind, perhaps Democrats in Congress can stop complaining about the ostensibly friendly relationship between President Trump and Putin and also stop agitating against Trump’s plans to allocate more money to the military.

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