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Ukraine's Fantastic $16 Billion Claim Against Gazprom

Ukrainian Prime Minister Arseny Yatsenyuk says Ukraine is claiming $16 billion against Gazprom, more than Ukraine pays for gas in any one year. He ignores the fact that Gazprom is merely charging Ukraine the price his former boss Tymoshenko agreed to pay.

This post first appeared on Russia Insider

Ukrainian Prime Minister Arseny Yatsenyuk has put the figure Ukraine is claiming from Gazprom at the arbitration case in Stockholm at a whopping $16 billion.  

This is more than the $14 billion Ukraine paid for all its gas imports in 2012 -- the last full year before the present crisis.  


Yatsenyuk has not explained how Ukraine has arrived at this figure.

The case originates from a contract former Ukrainian Prime Minister Tymoshenko negotiated with Putin and Gazprom in January 2009.

Previously, in the autumn of 2008, Gazprom and Ukraine’s national gas company Naftogaz almost came to terms on a gas supply contract. The deal was blocked by former President Yushchenko who said the price was too high. The dispute escalated, Ukraine’s gas got cut off, and Tymoshenko flew to Moscow where, without consulting Yushchenko, she struck a deal that was less favourable to Ukraine than the one Gazprom and Naftogaz had almost agreed.

Ukraine’s big problem is that no one denies that Gazprom is charging Ukraine the contractual price Tymoshenko agreed. Ukraine nonetheless says the contract is “unfair”.

If this case were being fought in England Ukraine would not have a chance. English courts take the view that parties to a contract are stuck with the terms they agree, and that it is not the court’s job to renegotiate a contract for them. If one party has made a poor bargain then that is their hard luck.

The only exception is where the level of bargaining power is so unequal that one party has forced an “unconscionable” bargain on the other.

It would be impossible to argue that here, in a case involving two states, especially since the EU accepts tht the contract is valid.  Arguably Ukraine did too, when it quashed Tymoshenko’s conviction arising from her handling of the negotiations.

Courts in some other countries can take a more paternalistic view. It is not impossible that the arbitration tribunal in Sweden might.  However if it does, it is very unlikely that it would award Ukraine anywhere close to the $16 billion it is claiming, which frankly looks like a number plucked out of thin air.

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