UPDATE: Gazprom starts procedures to terminate contracts with Ukraine

(Rewrites throughout)

MOSCOW, Mar 2 (PRIME) -- Russian gas giant Gazprom is starting to terminate sales and transportation contracts with energy holding Naftogaz Ukrainy in the wake of a Stockholm arbitration court’s order to pay the Ukrainian company U.S.$2.56 billion, Gazprom CEO Alexei Miller told reporters on Friday.

“Gazprom is forced to start a procedure to terminate sales and transit contracts with Naftogaz Ukrainy in the Stockholm arbitration court immediately,” Miller said.

“The Stockholm arbitration court has used double standards and made an asymmetric decision on the sales and transit contracts with Naftogaz Ukrainy. Thus, the decision of the arbitration court has disrupted the balance of interests of sides of the contracts. We are categorically against the idea of solving Ukraine’s economic problems at our expense. In this situation, prolongation of the contracts is economically unsound and unprofitable.”

On Thursday, Gazprom Deputy CEO Alexander Medvedev said that Gazprom had returned Naftogaz Ukrainy’s payment for March supplies and will not start the shipments because a supplementary agreement to the contract was not coordinated. Naftogaz Ukrainy CEO Andrei Kobolev said that Ukraine can experience gas shortages of about 10 million cubic meters per day.

European Commission’s spokeswoman Anna-Kaisa Itkonen said that Ukraine had warned the authority of a possible emergency in the gas pipeline system.

“In general concerning the situation, the Ukrainian authorities have warned us of a possible emergency in the gas transportation system of Ukraine. We have taken this into consideration. We are serious about these concerns. We are ready to cooperate with the Ukrainian and the Russian authorities,” Itkonen said, adding that that supplies of Russian gas to Europe and the Ukrainian gas reserves were stable according to the latest data.

The official also said that European Commission’s Vice President for Energy Union Maros Sefcovic plans to call the Russian and Ukrainian energy ministers on Friday and discuss possible gas negotiations.

Poland’s PGNiG said in a statement that it had signed a fixed-term contract with Naftogaz following suspension of Gazprom’s gas supplies. The contract will be in force until the end of March, under which the company will sell more than 60 million cubic meters of gas.

“We are ready to raise the amount of supplies or prolong the term of the contract depending on demand at the Ukrainian market,” the company said citing CEO Piotr Wozniak.

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