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The gas conflict between Gazprom and Turkmenistan, which has been dragging on for several years, has reached a new level, Forbes reported.
On June 08, Gazprom filed a lawsuit in Stockholm arbitration court against Turkmenistan's national gas company Turkmengaz, demanding the revision of the contract price, a source close to one of the affiliates of the Russian company told Forbes, which was also confirmed by a source close to Gazprom.
The representative of the Stockholm arbitration court did not respond to Forbes request and the official representative of Gazprom declined to comment.
According to the contract signed in 2010, the purchase price of Turkmen gas for Gazprom is around $240 per 1,000 cubic meters, and the volume of purchases under "take or pay" terms amounts to 10 bcm per year. Gazprom CEO Alexei Miller said at the shareholders meeting a year ago that his company could terminate any business relations with Turkmenistan. He noted there were disruptions in gas supplies.
In early 2015, Gazprom announced it would purchase only 4 bcm of gas from Turkmenistan and was going to challenge the terms of the contract in the Stockholm arbitration. The gas monopoly attributed reduction in gas purchases to the fact that demand for Russian gas in Europe and in Ukraine had shrunk. Due to declining gas export prices in Europe, linked to the constantly falling oil prices, the previously set price for Turkmen gas at $240 per 1,000 cubic meters appeared unsatisfactory to Gazprom.
Having failed to negotiate lower prices, Gazprom unilaterally shifted to payments at European export breakeven price in January. Gas payments in the first five months of this year have been carried out by Gazprom under this scheme. Recently, the Ministry of Oil and Mineral Resources of Turkmenistan stated that Gazprom had not been paying in full for gas supplies. According to Kommersant’s sources, Ashgabat authorities may lose about $400 million in revenues this year.
"In most cases Stockholm arbitration takes a plaintiff’s side, if a defendant does not agree to revision of the pricing policy, despite the relevant clause in the contract. There is a fairly wide range of instruments for enforcing such rulings, including the arrest of company’s assets abroad," said the Professor of the Department of International Law of MGIMO University of Russia Dmitry Labin. But in the case of Turkmenistan, the situation may evolve differently, he said.
Execution of the court's ruling could be problematic for Gazprom because Turkmenistan has a major stake in Turkmengaz. Developing countries often extend absolute immunity to all existing legal entities owned by such state and refuse to fulfill the requirements of arbitration, according to Labin.