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Published On: Tue, Mar 13th, 2018

Ukraine’s Naftogaz expects to recover $8 bln from Russia over assets seized in Black Sea and Crimea

nsnbc : Ukrainian energy giant NJSC Naftogaz may recover from Russia as early as this year nearly $8 billion in damages over the seizure of the company’s assets in the Black Sea and Crimea following what Ukraine and the European Union perceive as Russia’s illegal annexation of Crimea in the spring of 2014.

Photo courtesy Naftogaz

Photo courtesy Naftogaz

Naftogaz Chief Commercial Officer Yuriy Vitrenko used his Facebook page to state that: “Indeed, this year we can win up to $8 billion. But then there will be a question of how we are going to take it.”

On September 20, 2017, Naftogaz reported that they had filed a lawsuit with the International Court of Arbitration at the Permanent Court of Arbitration in The Hague (Netherlands) demanding from Russia a $5 billion compensation for damages incurred by the company as a result of Russia’s illegal seizure of Naftogaz’s assets in Crimea.

The Court is set to hand down a decision on the case before the end of 2018. Vitrenko stressed that “the defendant is the Russian Federation”. Ukraine’s claims amount to $5 billion, which, added the penalties, will total $8 billion.

Ukraine insists that the Russian Federation violated international norms and international law when it seized Crimea. Russia, for its part, insists that Crimea legally declared its independence from Ukraine and applied for accession to the Russian Federation before Moscow allowed Crimea to accede into the Russian Federation.

Most independent experts would agree that the situation is more complex than either Moscow or Kiev would like to admit. The United Nation’s 1973 Declaration of Principles stipulates that the right to self-determination and the right to territorial integrity are equally valid, but that one cannot be implemented by violating the other. In other words, one could argue that Kiev might have allowed a referendum on independence, which its constitution did not allow for, or that Russia illegally annexed Crimea and violated Ukraine’s territorial integrity.

Following what Ukraine perceives as the  illegal annexation, of Crimea,  Chernomornaftogaz lost its key assets, in particular, the “Petro Hodovanets” and “Ukraine” drilling rigs, as well as their access to natural gas deposits on the Black Sea shelf. To protect company interest, Naftogaz initiated in October 2016 arbitration proceedings in accordance with the Agreement between the Cabinet of Ministers of Ukraine and the Government of the Russian Federation on the promotion and mutual protection of investments, better known as the Russian-Ukrainian bilateral investment agreement.

In mid-January, 2017, Naftogaz attracted international law firm Covington & Burling LLP, the one with positive experience in protecting clients’ interests in litigations against Russia and Russian state-owned companies. Ukraine could, ultimately, attempt to use its role as transit country for Russian gas to the European Union as bargaining chip.

CH/L – nsnbc 13.03.2018

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