Ukraine’s state energy company Naftogaz has secured a ruling from an international arbitration tribunal that ordered Russia to pay $5bn in losses related to the seizure of natural gas and oil assets in Crimea.
“Russia must now comply with this decision in accordance with its obligations under international law,” Oleksiy Chernyshov, chief executive of Naftogaz, said in a statement on Thursday.
Ukraine has filed scores of lawsuits against Russia seeking compensation for damages linked to its aggression, starting with the annexation of Crimea in 2014.
The court in The Hague found that compensation should be equal to the fair market value of Naftogaz assets before expropriation. The court rejected Russian claims that Naftogaz was not entitled to any compensation for the expropriation of its assets.
The award is the largest by an international arbitration tribunal relating to the expropriation of assets by Russia in Crimea.
In addition, the court ruled that Russia must reimburse Naftogaz for costs associated with the arbitration proceedings.
The Kremlin said it would analyse the ruling before deciding on its next steps. “This litigation has taken place, and it is not new. But the decision is new and has to be analysed,” Kremlin spokesperson Dmitry Peskov told reporters on Thursday.
However, it was not immediately clear how Ukraine would enforce the decision by the tribunal, more than a year into its full-blown war with Russia.
In its statement, Naftogaz said the “arbitration awards can be executed through an enforcement mechanism”, which would allow Russian assets abroad to be frozen. But with western sanctions having already frozen the assets of the Russian central bank, among others, it is unlikely that the Ukrainian gas company would be able to retrieve the entire sum awarded by the arbitration court.
Timothy Ash, an emerging markets strategist at BlueBay Asset Management, described the ruling as a “huge legal win for Ukraine”, adding “I would think more to come.”
“Eventually Putin’s war in Ukraine will bankrupt Russia,” he added in the note to investors.
Additional reporting by Anastasia Stognei in Riga