Russian energy firm Gazprom clarified to Ukrainian energy provider Naftogaz that it can penalize for an arbitration claim. Recently the cost of gas for the Euro market shot up as fears the supplies that pass-through Ukraine will stop.

Threats of Sanctions Lead to Disagreements

In 2019, Naftogaz entered into a deal with a Russian gas firm to transfer at least 65 billion cubic meters of gas in 2020 and 40 billion cubic meters yearly from 2021 to 2024, reported CE Energy News.

Last May, the Ukraine firm proclaimed force majeure of Russian gas transfer through GMS Sokhranivka and the boundary compressor facility (CS) Novopskov, situated in Russian military-occupied land, quoting that its contexts made it impossible to operate, noted Off-Shore technology.

Instead, Naftogaz suggested transporting these quantities through a distinct point of entry. Based on the Ukrainian side, the Russian side might incur no additional costs as a result of the transit flow transfer.

But in September, the gas provider launched a new arbitration procedure against Russia's gas giant on the grounds of failure to make gas transit payments on time and in full.

In a remark, Gazprom said it completely rejects all of the claims of Naftogaz in the arbitral process launched regarding the transportation of Russian gas to Europe, demonstrating that services not delivered by the Ukrainian group must not and will not be paid for.

Lawsuit Could Result in Sanctions 

As stated by the Russian firm, the Ukrainian energy provider had already refused to fulfill its transit commitments through the Sohranovka GMS for appropriate reasons. The Ukrainian company had also conceded to the fact of the non-fulfillment of services.

Read Also: Vladimir Putin Net Worth 2022: Does Anyone Know Russian President's Hidden Wealth?

According to the statement, the Ukraine provider is fully aware of its failure to meet its commitments. It will result in non-payment under the December 30, 2019 contract, even if Naftogaz of Ukraine proclaims a force majeure in Ukraine, citing Interfax.

The Russian gas company also asserted that Naftogaz's filing of a plea was an impolite move and a resumption of the Ukrainian firm's morally bankrupt actions.

Insisting that additional efforts by Naftogaz to have the dispute heard by the International Court of Arbitration can provide Moscow with legitimacy to impose sanctions on it and add it to the list of sanctioned entities.

In practice, this means that Gazprom will be barred from fulfilling obligations to sanctioned entities under completed deals, including financial transactions.

CEO of the Ukraine firm, Yuriy Vitrenko, reacted to Gazprom's allegations on Twitter, asserting that the declaration embodies Gazprom's disregard for the rule of law.

As said by Vitrenko, the firm has proclaimed force majeure in transit via entry point Sokhanovka since it is governed by Russian armed forces and has offered transit through entry point Sudzha at little or no extra cost.

Furthermore, it was stated that the Russian company could not use the force majeure stipulation exercised by Naftogaz to avert fee obligations imposed by the agreement.

The Russian firm acknowledged the option of the other gas provider to settle everything via an arbiter. Naftogaz exercises this contractual right which is not a hostile act.

Gazprom told Ukrainian energy provider Naftogaz their conditions for receiving payment is questionable and wants to digress how it deals with contracts.

Related Article: Gazprom Claims Siemens Energy Must Prove German Turbine Is Not Covered by Sanctions