14:38 GMT +316 October 2019
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    The Court of Appeal of Svea County in Sweden will hold preliminary hearings on Russian energy giant Gazprom’s appeal against a Stockholm arbitration court’s verdict.

    Earlier, the court ruled in favour of Ukraine’s Naftogaz energy company regarding contracts for the supply and transit of gas and obliged Gazprom to pay the Ukrainian company $2.56 billion.

    According to the Russian giant's Eurobond offering statement, the company disputes both the preliminary and the final decision of the arbitration on gas supplies.

    Following a dispute between Gazprom and Naftogaz, a court in Switzerland in early November also issued an injunction barring the operators of the Nord Stream gas pipeline from making payments to Gazprom. It has ordered all payments from Nord Stream AG and Nord Stream 2 AG to be directed to the Swiss bailiffs instead of the energy giant.

    Sputnik has discussed this with Dr Mamdouh Salameh, International oil economist and visiting professor of energy economics at the ESCP Europe Business School in London.

    Sputnik: In your view how justified was the initial decision made by the Swiss court?

    Dr Mamdouh Salameh: The decision by the Swiss court to issue an injunction that blocks payments from the Nord Stream gas pipeline to Russia's Gazprom has very little to do, in my opinion, with Ukraine' Naftogaz demand of payment of $2.56 billion by the Russian giant Gazprom for allegedly failing to supply Ukraine with the agreed amount of natural gas, and has everything to do with the building of the Nord Stream 2 gas pipeline under the Baltic for gas shipments to Germany and the European Union.

    READ MORE: Nord Stream-2 Project Advantageous for Europe — Kremlin Spokesman

    Under the Swiss court ruling, all payments from Nord Stream 1 and Nord Stream 2 which are majority held by Gazprom will go to the Swiss bailiffs. Of course, it's also intended to block Gazprom's prospect of securing a Eurobond issue.

    The Swiss court decision follows in the footsteps of the Stockholm arbitration court ruling in favour of Naftogaz in the payments with Gazprom. Now Gazprom, of course, has appealed the ruling of both the Swedish arbitration court and the Swiss court injunction, however, one can't but feel the invisible hand of the United States, Poland, and the Baltic States behind Ukraine's application to the Swiss court for an injunction to block payments from Nord Stream 1 and Nord Stream 2 to Gazprom.

    The US and the Baltic States have been fiercely opposed to the building of the Nord Stream 2 gas pipeline which will bring Russian gas supplies to Germany and the European Union under the Baltic Sea. Thus, bypassing Ukraine. Still, in my opinion, Nord Stream 2 is unstoppable.

    Sputnik: Speaking of the Swiss court decision to block Nord Stream 2 payments can you speak about who might benefit from that? You touched upon the fact that it has to do with the Nord Steam project?

    Dr Mamdouh Salameh: The sum of $2.56 billion, which Ukraine claims is due to it, could have been settled out-of-court in an amicable way. The sum is peanuts for Gazprom, whose revenue in 2017 exceeded $100 billion. However, the biggest loser in this dispute is Ukraine. Russian President Putin said after his meeting in Helsinki with US President Trump in May this year that some Russian gas supplies to the European Union will still continue to go through Ukraine provided Gazprom and Ukraine settle the legal issues between them.

    READ MORE: US, Ukraine to Work Together to Stop Nord Stream 2 Project — Pompeo

    If no out-of-court settlement, of course, is reached I believe then Gazprom will not transport gas supplies to Europe through Ukraine costing it billions of dollars in lost transit fees and possibly badly needed gas supplies. Geopolitically, the losers will be, of course, the United States, Poland, and the Baltic States since the Nord Stream 2 will be built whether they like it or not.

    Sputnik: Can you please comment on the likelihood of an out-of-court agreement being reached between Ukraine and Gazprom especially on the back of the recent escalation of tensions between the two countries regarding the Azov Sea.

    Dr Mamdouh Salameh: Well, as you realise the dispute between Ukraine and Russia has a political dimension and an economic dimension. For many years Ukraine has not been paying for the gas which passes through it to Europe and taking and using it without paying for it. So there was an accumulation of debt due to Russia.

    Russia, of course, cut at one time the supply of gas to Ukraine in 2009, if my memory is right, and that affected the European gas market the EU gas market and, of course, it affected Ukraine itself. Then they reached some sort of settlement but there has always been some dispute over price, transit fees, and the taking of Russian gas from the Ukrainian pipelines and using it without paying for it.

    READ MORE: US Puts Political Pressure on EU to Sell Its More Expensive Gas — Moscow

    It would have been the ideal situation if Ukraine accepted Russia's offer to settle the dispute of the payment of the $2.56 billion out-of-court because in that case there would have not been a decision or injunction by the Swiss court which, of course, is an irritation for Gazprom.    

    The views expressed in this article are solely those of Dr Mamdouh Salameh and do not necessarily reflect the official position of Sputnik.

    The views and opinions expressed in the article do not necessarily reflect those of Sputnik.


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