Poland Threatens to Seize Gazprom’s Nord Stream Assets as Penalty for Russia’s Non-Compliance with Court Ruling Favoring Poland in Gas Transit Dispute

On April 28, 2020, Poland’s Deputy State Assets Minister Janusz Kowalski threatened the seizure of Gazprom’s European assets used for the Nord Stream 2 (NS2) project if the company does not comply with a March ruling by an international arbitration court in Sweden.  The court ruled that Gazprom had overcharged PGNiG for gas supplied from November 2014 through February 2020 through its “take-or-pay” clause instituted in the original 1996 contract.  The contract required Poland to purchase 10.2 bcm of gas per year at a fixed price, whether or not the country needed or wanted the full amount.  While the price set in the contract has not been released, the court ruling suggested that it was higher than gas prices set in Western European markets.

According to Kowalski, if Gazprom fails to pay the awarded $1.5 billion, PGNiG can file another lawsuit with the Stockholm court to enforce the award by having Gazprom’s assets seized.  It has been reported that a seizure of these assets could cause a further delay in the completion of Gazprom’s NS2 pipeline, which is already facing significant setbacks due to U.S. sanctions

According to PGNiG’s statement, “Gazprom is not honoring the award issued following the long arbitration process, continuing to issue invoices based on the invalid pricing formula.”

PGNiG has already announced that it will not renew its current 10-year gas supply contract with Gazprom when it expires in 2022, which is one of many steps Poland has taken to reduce its dependence on Russian gas.  Currently, the country receives more than half of its consumed gas from Russia, however, it has taken steps to diversify its energy sources by building new LNG import facilities and already procuring supplies from the United States, Qatar, and Norway.

Poland is also developing the Baltic Pipe, which will bring natural gas from fields in Norway to the European market via Denmark.  Between 2015 and 2019, PGNiG’s share of Russian gas imports decreased from 87% to 60%, and the operator’s share of LNG imports increased 23% year-on-year between 2018 and 2019.  This trend is expected to continue.

Following the court’s decision, PGNiG disclosed plans to use the $1.5 billion award to purchase new assets meant to develop the country’s domestic heat market as part of its zero-emission energy source systems, presumably as additional alternatives to Russian gas.