New gas dispute breaks out between Ukraine and Russia

MOSCOW/KIEV: Kiev and Moscow plunged into a new gas dispute on Thursday after Ukraine’s Naftogaz demanded compensation for Gazprom’s unexpected decision not to restart gas supplies.

The row threatens to open a new front in a long-running legal battle between the companies - a by-product of broader political tension following Russia’s annexation of Crimea in 2014 and support for separatists in eastern Ukraine.

It follows Wednesday’s international arbitration court order for Gazprom to pay $2.56 billion to Naftogaz after weighing mutual claims and counter-claims related to gas supplies and transit. On Thursday, Gazprom said it would not restart gas supply to Ukraine as an additional agreement to the existing arrangements had still not been reached.

It did not give further details. "Therefore in this situation, acting in good faith, we refunded in full the (prepaid) sum from Naftogaz. Clearly, gas supplies to Ukraine’s Naftogaz will not be carried out from March 1," Gazprom’s deputy head Alexander Medvedev said in a statement.

The decision is connected to the Stockholm arbitration court dispute because, in one of its rulings, the court ordered Naftogaz to buy 5 billion cubic metres of gas from Gazprom annually from 2018.The March deliveries would have been the first time Ukraine bought gas from Russia since November 2015, when it started buying gas from Europe via so-called reverse flows to try to cut its energy dependency on Moscow.