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Ukraine wins in gas dispute in Stockholm tribunal against Russia; but victory may be hollow

Russia’s Gazprom rejects award, cancels Ukraine’s gas supply and transit contracts; stops supplying gas to Ukraine

Alexander Mercouris

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In a conflict in which Ukraine repeatedly claims victories which in reality turn out to be defeats, Ukraine did win finally win a genuine victory over Russia at the Stockholm Arbitration Tribunal on Wednesday 28th February 2018.

The victory came in the litigation between Russia’s monopoly gas exporter gas exporter Gazprom and Ukraine’s national gas company Naftogaz.

After having previously rejected all of Naftogaz’s arguments against the legality of its gas supply contracts with Gazprom, and after having ordered Naftogaz to pay Gazprom $2 billion for unpaid gas, the Stockholm Arbitration Tribunal ordered on Wednesday 28th February 2018 that Gazprom owed Naftogaz $4.7 billion for its failure to supply agreed volumes for transit.

The $2 billion Naftogaz was previously ordered to Gazprom is set off against the $4.7 billion Gazprom is ordered to pay Naftogaz, ending the litigation with an overall award to Naftogaz of $2.54 billion.

The Russian news agency TASS has provided an account of the issues in the litigation

Gazprom vs Naftogaz dispute

Gazprom and Naftogaz signed the current contract for the supply of gas to Ukraine in January 2009 and it is valid until December 31, 2019. Under the contract, the volume of supplies was to be 40 billion cubic meters of gas in 2009, and starting from 2010 – 52 billion cubic meters annually. However, since 2012, Naftogaz failed to fully intake the contracted volume. Since November 2015, Kiev has not bought Russian gas, replacing it with reverse gas from Europe.

In 2014, Gazprom and Naftogaz filed lawsuits against each other in the Stockholm Arbitration.

Ukraine sought a retroactive price change, recovery of overpayment for gas and cancellation of the “take or pay” principle.

Gazprom demanded that Naftogaz should pay arrears for gas that had been supplied earlier. Gazprom’s demands for Naftogaz amounted to more than $37 bln.

The Stockholm Arbitration satisfied the requirements of the companies only partially.

In December 2017, the court ordered Naftogaz to pay Gazprom $2 bln for the deliveries, but reduced the annual contractual volume of purchases to 5 billion cubic meters.At the same time, the “take or pay” condition was preserved for 80% of this volume. This condition will be effective only in 2018.

The court also rejected most of Naftohaz’s claims to Gazprom which concerned overpayment for gas. Only the price of gas received by the Ukrainian company in the second quarter of 2014 was lowered (from $485 to $352 per 1,000 cubic meters). Naftogaz wanted a retroactive price change starting from May 2011.

In the gas transit contract, Naftogaz and Gazprom agreed that the Russian holding will pump 110 billion cubic meters of gas through Ukraine annually. However, the contract notes that the annual volume is specified in additional agreements to the contract, depending on the obligations of Gazprom to European consumers.

Naftogaz demanded that Gazprom should pay $17 bln for the failure to supply the agreed volumes for transit. It also sought the revision of tariffs and conditions for the transit of Russian gas through Ukraine.

The Stockholm court ruled that Gazprom should pay about $ 4.7 bln to Naftogaz (taking into account the satisfied counter claims, Gazprom has to pay $ 2.56 bln). At the same time, Gazprom said that the arbitration court rejected Naftogaz’s demands to increase the tariff for gas transit and change the contract in accordance with Ukrainian legislation.

This account does not give reasons for the Stockholm Arbitration Tribunal’s decision.  Alexey Miller, Gazprom’s CEO, has however explained it in this way

The Stockholm arbitration, guided by double standards, adopted an asymmetric decision on our contracts with Naftogaz of Ukraine regarding supply and transit of gas. The decision seriously violates the balance of interests of the parties under these contracts. The arbitrators ground their decision by the fact that the situation with the Ukrainian economy has drastically worsened. We are totally against the situation when Ukraine’s economic problems are solved at our expense. In this situation, the continuation of the contracts’ validity is not economically feasible and unprofitable for Gazprom

(bold italics added)

As a general principle, European commercial law tends to take a more interventionist and paternalist approach to commercial disputes than is the case in common law jurisdictions such as those of England and (most of) the US.

A decision which in effect rewrites a contract for the benefit of a weaker party would not therefore be wholly unprecedented, and an arbitration panel – which is not technically speaking a court – has more liberty to be flexible than a court does.

Having said this, if it is in fact the case that the Stockholm Arbitration Tribunal made such a large award in Naftogaz’s favour simply because Ukraine’s economy has deteriorated since 2009, then that would indeed be a very remarkable thing indeed, and Gazprom would in that case be justified in complaining about it.

After all, as Alexey Miller says, it is not Gazprom’s job to support Ukraine’s economy, and it is absurd to suggest that Ukraine’s economic problems – many of which are self-inflicted – should be solved at Gazprom’s expense.

Having said this, without publication of the actual reasons for the award – which is unlikely to happen – it is impossible to say for certain whether Miller is describing them properly.

Irrespective of what the Stockholm Arbitration Tribunal’s reasons for its decision were, Gazprom has has wasted no time in responding to it.

Firstly, it has rejected the decision.

This Gazprom is able to do because the Stockholm Arbitration Tribunal is an arbitration panel not a court.  If Ukraine wishes to enforce the award it must therefore convert the Stockholm Arbitration Tribunal’s decision into a court Judgment.

In most cases that is purely a formality.  However in this case it might not be straightforward if Miller’s account of the reasons for the Stockholm Arbitration Tribunal’s decision is true.  Many courts might balk at a decision which appeared to rewrite a contract in so radical a way and for such a reason.

There is also the issue of which courts would have jurisdiction in the case to convert the award into a court Judgment.

I do not know the answer to that question.  In order to answer it I would need to see the relevant contracts between Gazprom and Naftogaz.  I doubt that will ever happen because as I understand it the contracts are secret.

All I will say on the jurisdiction is that it is interesting that Ukrainian President Poroshenko is saying that if Gazprom refuses to pay the award Ukraine will enforce the award by seizing Gazprom’s assets in Ukraine itself.

That suggests either that Poroshenko believes that it is the Ukrainian courts which have jurisdiction in the matter, or that he is not confident that whichever other courts do have jurisdiction in the matter would agree to enforce the award by converting it into a judgment.

More to the point, Gazprom has signalled its total loss of confidence in the Stockholm Arbitration Tribunal by cancelling all its gas supply and transit contracts with Naftogaz, and by informing the Stockholm Arbitration Tribunal that it no longer considers it to have any further role in the matter.

In keeping with this decision, Gazprom has stopped supplying gas to Naftogaz, and has returned Naftogaz’s prepayment for the future supply of gas.

This has in turn triggered a short term gas crisis in Ukraine, which can no longer import gas from Russia to cover its own needs, but which is struggling to find alternative sources of gas in Europe, which is currently experiencing a gas shortage because of the recent cold weather.

In my opinion it is unlikely Naftogaz will ever see the $2.56 billion it has been awarded.

However against that Naftogaz and Ukraine have escaped paying the $2 billion it looked like they would have to pay to Gazprom just a few weeks ago.

Given Ukraine’s deteriorating financial and economic position the Ukrainian government probably calculates that a few days or even weeks of gas shortages is a small price to pay for escaping payment of the $2 billion to Gazprom, which in its present condition Naftogaz and Ukraine would struggle to pay.

As for the Russians, I suspect that privately they believe that Ukraine’s friends in the West applied backstairs pressure on the Stockholm Arbitration Tribunal when it looked like Naftogaz was about to lose the case to make what the Russians say is an illogical decision.

That will reinforce their decision to cut Ukraine out entirely as a transit state for their gas, regardless of whatever public assurances Putin may be currently giving to the contrary.

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Putin, Trump meet in Helsinki for first bilateral summit

The Helsinki summit is the first ever full-fledged meeting between Vladimir Putin and Donald Trump. Their previous encounters were brief talks on the sidelines of the G20 and APEC summits in 2017.

Vladimir Rodzianko

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Russian President Vladimir Putin and US President Donald Trump are meeting in the Finnish capital of Helsinki for their first bilateral one-on-one meeting.

Trump arrived in the Finland capital a day early, while the jet of Putin, who wrapped up his nation’s hosting of the World Cup Sunday, touched down around 1 p.m. local time and the Russian president’s motorcade whisked him straight to the palace where the two world leaders are meeting.

Trump signed an August 2017 law imposing additional sanctions on Russia. The law bars Trump from easing many sanctions without Congress’ approval, but he can offer some relief without a nod from Congress.

Almost 700 Russian people and companies are under U.S. sanctions. Individuals face limits on their travel and freezes on at least some of their assets, while some top Russian state banks and companies, including oil and gas giants, are effectively barred from getting financing through U.S. banks and markets.

The agenda of the summit hasn’t been officially announced yet, though, the presidents are expected to discuss global crises, such as the Syrian conflict and Ukraine, as well as bilateral relations.

Stay tuned for updates…

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“Foreign entity, NOT RUSSIA” hacked Hillary Clinton’s emails (Video)

Rep. Louie Gohmert (R-Tx): Hillary Clinton’s cache of 30,000 emails was hacked by foreign actor, and it was not Russia.

Alex Christoforou

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A stunning revelation that hardly anyone in the mainstream media is covering.

Fox News gave Louie Gohmert (R-Tx) the opportunity to explain what was going on during his questioning of Peter Strzok, when the the Texas Congressman stated that a “foreign entity, NOT RUSSIA” hacked Hillary Clinton’s emails.

Aside from this segment on Fox News, this story is not getting any coverage, and we know why. It destroys the entire ‘Russia hacked Hillary’ narrative.

Gohmert states that this evidence is irrefutable and shows that a foreign actor, not connected to Russia in any way, intercepted and distributed Hillary Clinton’s cache of 30,000 emails.

Remember to Please Subscribe to The Duran’s YouTube Channel.

Via Zerohedge

As we sift through the ashes of Thursday’s dumpster-fire Congressional hearing with still employed FBI agent Peter Strzok, Luke Rosiak of the Daily Caller plucked out a key exchange between Rep. Louie Gohmert (R-Tx) and Strzok which revealed a yet-unknown bombshell about the Clinton email case.

Nearly all of Hillary Clinton’s emails on her homebrew server went to a foreign entity that isn’t Russia. When this was discovered by the Intelligence Community Inspector General (ICIG), IG Chuck McCullough sent his investigator Frank Ruckner and an attorney to notify Strzok along with three other people about the “anomaly.”

Four separate attempts were also made to notify DOJ Inspector General Michael Horowitz to brief him on the massive security breach, however Horowitz “never returned the call.” Recall that Horowitz concluded last month that despite Strzok’s extreme bias towards Hillary Clinton and against Donald Trump – none of it translated to Strzok’s work at the FBI.

In other words; Strzok, while investigating Clinton’s email server, completely ignored the fact that most of Clinton’s emails were sent to a foreign entity – while IG Horowitz simply didn’t want to know about it.

Daily Caller reports…

The Intelligence Community Inspector General (ICIG) found an “anomaly on Hillary Clinton’s emails going through their private server, and when they had done the forensic analysis, they found that her emails, every single one except four, over 30,000, were going to an address that was not on the distribution list,” Republican Rep. Louie Gohmert of Texas said during a hearing with FBI official Peter Strzok.

Gohmert continued..

“It was going to an unauthorized source that was a foreign entity unrelated to Russia.”

Strzok admitted to meeting with Ruckner but said he couldn’t remember the “specific” content of their discussion.

“The forensic examination was done by the ICIG and they can document that,” Gohmert said, “but you were given that information and you did nothing with it.”

According to Zerohedge “Mr. Horowitz got a call four times from someone wanting to brief him about this, and he never returned the call,” Gohmert said – and Horowitz wouldn’t return the call.

And while Peter Strzok couldn’t remember the specifics of his meeting with the IG about the giant “foreign entity” bombshell, he texted this to his mistress Lisa Page when the IG discovered the “(C)” classification on several of Clinton’s emails – something the FBI overlooked:

“Holy cow … if the FBI missed this, what else was missed? … Remind me to tell you to flag for Andy [redacted] emails we (actually ICIG) found that have portion marks (C) on a couple of paras. DoJ was Very Concerned about this.”

Via Zerohedge

In November of 2017, IG McCullough – an Obama appointee – revealed to Fox News that he received pushback when he tried to tell former DNI James Clapper about the foreign entity which had Clinton’s emails and other anomalies.

Instead of being embraced for trying to expose an illegal act, seven senators including Dianne Feinstein (D-Ca) wrote a letter accusing him of politicizing the issue.

“It’s absolutely irrelevant whether something is marked classified, it is the character of the information,” he said. Fox News reports…

McCullough said that from that point forward, he received only criticism and an “adversarial posture” from Congress when he tried to rectify the situation.

“I expected to be embraced and protected,” he said, adding that a Hill staffer “chided” him for failing to consider the “political consequences” of the information he was blowing the whistle on.

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Donald Trump plays good cop and bad cop with a weak Theresa May (Video)

The Duran – News in Review – Episode 55.

Alex Christoforou

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US President Donald Trump’s state visit to the UK was momentous, not for its substance, but rather for its sheer entertainment value.

Trump started his trip to the United Kingdom blasting Theresa May for her inability to negotiate a proper Brexit deal with the EU.  Trump ended his visit holding hands with the UK Prime Minister during a press conference where the most ‘special relationship’ between the two allies was once again reaffirmed.

Protests saw giant Trump “baby balloons” fly over London’s city center, as Trump played was his own good cop and bad cop to the UK PM, outside London at the Chequers…often times leaving May’s head spinning.

Even as Trump has left London, he remains front and center in the mind of Theresa May, who has now stated that Trump advised her to “sue” the European Union to resolve the tense negotiations over Brexit.

Trump had mentioned to reporters on Friday at a joint press conference with Theresa May that he had given the British leader a suggestion that she found too “brutal.”

Asked Sunday on the BBC’s Andrew Marr Show what that suggestion was, May: “He told me I should sue the EU. Not go into negotiation, sue them.” May added…

“What the president also said at that press conference was `Don’t walk away. Don’t walk away from the negotiations. Then you’re stuck.”‘

The Duran’s Alex Christoforou and Editor-in-Chief Alexander Mercouris summarize what was a state visit like no other, as Trump trolled the UK PM from beginning to end, and left London knowing that he got the better of a weakened British Prime Minister, who may not survive in office past next week.

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Via CNBC

It wasn’t exactly clear what Trump meant. The revelation came after explosive and undiplomatic remarks Trump made this week about May’s leadership — especially her handling of the Brexit negotiations — as he made his first official visit to Britain.

In an interview with The Sun newspaper published Thursday — just as May was hosting Trump at a lavish black-tie dinner — Trump said the British leader’s approach likely “killed” chances of a free-trade deal with the United States. He said he had told May how to conduct Brexit negotiations, “but she didn’t listen to me.”

He also praised May’s rival, Boris Johnson, who quit last week as foreign secretary to protest May’s Brexit plans. Trump claimed Johnson would make a “great prime minister.”

The comments shocked many in Britain — even May’s opponents — and threatened to undermine May’s already fragile hold on power. Her Conservative government is deeply split between supporters of a clean break with the EU and those who want to keep close ties with the bloc, Britain’s biggest trading partner.

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