Kazakhstan will not enforce a special court’s decision allowing Ukraine’s Naftogaz to collect a $1.4 billion international arbitration award from Russia’s Gazprom, Justice Minister Erlan Sarsembayev has declared just days after Kazakhstan’s AIFC court upheld the award. The legal battle stemmed from a 2019 contract for Russian natural gas transit through Ukraine.
Following Russia’s 2022 invasion, Naftogaz declared force majeure at a major distribution station, prompting Gazprom to stop fully paying for transit services. In September 2022, Naftogaz initiated proceedings through the International Chamber of Commerce (ICC) in Switzerland. Last year, arbitrators ordered Gazprom to pay $1.37 billion plus costs.
Last week, a court at the Astana International Financial Centre (AIFC) recognized the Swiss award. The AIFC Court’s decision marked the first time a foreign public court authorized the forced recovery of assets against Gazprom related to this specific $1.4 billion arbitration award within its jurisdiction. AIFC is a special financial and economic zone in Kazakhstan that operates under a unique legal framework based on the principles of English common law. AIFC’s acting law is based on the Constitution of Kazakhstan, but explicitly incorporates the principles, legislation and precedents of the law of England and Wales.
However, the Kazakh government has intervened, with Justice Minister Sarsembayev saying that the state will not authorize any seizure or forced sale of Gazprom assets. This swift political block maintains Kazakhstan’s strategic balancing act, protecting its deeply rooted bilateral ties with Russia ahead of an upcoming visit by Vladimir Putin to Astana. Russia and Kazakhstan maintain a massive, strategic economic alliance, with bilateral trade turnover nearing $30 billion per annum.
Russia remains Kazakhstan’s top overall trading and investment partner, while Kazakhstan acts as a vital corridor for Russian trade, navigating regional integration while avoiding secondary Western sanctions. Russia is deeply embedded in Kazakhstan’s energy sector: an international consortium led by Russia’s Rosatom has begun construction on Kazakhstan’s first nuclear power plant.
The two countries share the longest continuous border in the world, and are rapidly expanding transport corridors and logistics hubs to connect with broader Asian and Eurasian markets.
By Alex Kimani for Oilprice.com
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