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Dutch arbitration court finds in favor of Naftogaz over Crimea gas assets

Highlights

Ukrainian company values lost assets at $5 billion

Court to rule on compensation at later hearing

London — An arbitration court in the Netherlands has ruled that Russia is liable for the "unlawful seizure" of assets owned by Ukraine's state-owned Naftogaz in Crimea, which was annexed by Moscow in 2014.

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The arbitration court will now launch a second phase of the proceedings to determine the amount of compensation Russia owes to Naftogaz, with a ruling expected in 2019-2020, the Ukrainian company said.

The assets include offshore exploration licenses, gas pipelines, stored gas and gas supply equipment such as supply vessels, drilling rigs and vehicles.

Naftogaz appealed to the court of arbitration in The Hague in 2016, claiming the seizure of Naftogaz assets -- which the Ukrainian company estimates to be worth some $5 billion -- violated the Russia-Ukraine bilateral investment treaty (BIT).

"It's a very important victory," Naftogaz CEO Andriy Kobolev said. "The cost of the Crimea annexation for Russia will constantly grow and the tribunal's decision is an important step in this direction," he said.

Naftogaz said the assets seized included those it owned directly as well as others owned by Naftogaz subsidiaries Chornomornaftogaz, UkrTransGaz, Likvo, UkrGasVydobuvannya, UkrTransNafta and Gaz Ukraiiny.

The Russian government could not be reached for immediate comment on the ruling.

The verdict on Crimea adds to existing arbitration rulings regarding the 10-year gas supply and transit agreement between Naftogaz and Russia's Gazprom.

Naftogaz was awarded a net $2.56 billion by the Stockholm arbitration court, but Gazprom has appealed against the rulings with a hearing expected only in 2020.

The transit deal between the two parties is set to expire at the end of 2019, with Russia having warned that no new transit deal would be agreed before the arbitration case with Naftogaz is settled.

-- Stuart Elliott, stuart.elliott@spglobal.com

-- Edited by Alisdair Bowles, newsdesk@spglobal.com