Kiev taking Moscow to court: Who will get Black Sea gas?

Ukraine is preparing a lawsuit against Russia in the International Court of Justice. This time, Kiev blames Moscow for violating international maritime laws and seeks to get back the Black Sea gas field that supplies gas to Crimea. Experts say, everything depends on whether Kiev has put up with the loss of the peninsula or still claims it as part of Ukraine.

Kiev is in a hurry

Ukraine’s intention to sue Russia became known after foreign minister of that country Pavel Klimkin issued a statement saying: “This decision aims to protect Ukraine’s rights and interests guaranteed by the UN Convention on the Law of the Sea of 1982 by Russia in the Crimean territorial sea, waters of the Black and Azov seas and the Kerch Strait, including rights to natural resources of the continental shelf."

One can guess from the pre-trial consultations that Kiev is determined to continue its struggle. On August 11, the two countries’ diplomats met to discuss the interpretation and application of the maritime laws. Afterwards, Ukraine unlike Russia said the consultations were over.

“Unfortunately, there was no substantial discussion at all. We heard a long list of claims from the Ukrainian side and expressed our willingness to consider them, as well as the question regarding applicability of UNCLOS itself to those claims...However, as it turned out, all those questions had been addressed to the Russian side with the only purpose of creating a formal pretext for announcing that the «pre-trial consultations with the Russian Federation regarding sovereign rights in the marine areas around Crimea» have been completed. Thus no solution to problems (whether they exist or not) has been sought,” Maria Zakharova, Spokesperson for the Russian Foreign Ministry said.

A sea of gas

The Crimean authorities took Ukraine’s threats as a joke of sick persons. Crimea’s leader Sergey Aksyonov told TASS he stopped commenting on the claims by the Kiev leadership yet long ago. “They are sick persons,” he said.

Meantime, experts think Kiev has a chance to get back the largest field on the continental shelf.

Actually, after Crimea reunited with Russia, the status of the territories bordering with Ukraine hanged in the air, as Kiev claims that Russia has annexed Crimea. Although the border with Ukraine on the Strait was rebuilt for security reasons, the situation in the northwestern part of the Black Sea between the peninsula and Ukraine is still uncertain. On the one hand, the nationalized Chernomorneftegaz Company continued operating on the developed fields in the Black Sea. On the other hand, few of the fields proved to be in Russia with Crimea’s reunion.

In late November 2015, Chernomorneftegaz evacuated from the Odessa gas field two up-to-date drilling rigs “over a threat of terror attack.” Meantime, the Kommersant newspaper wrote it was because a probable expropriation of the property of Chernomorneftegaz - it was nationalized in Crimea - under the international claim of Ukraine’s Naftogaz Company that earlier managed Chernomorneftegaz.

Chernomorneftegaz Director General Igor Shabanov admitted then that the Odessa field is located in neutral waters with uncertain international legal status. The evacuation of the drilling rigs worth $800 million was connected with that fact. The problem is that Chernomorneftegaz bought them from Naftogaz on a loan free of interest. Later, they planned to use it for capitalization of the Crimean company that was managed by Naftogaz on behalf of Ukraine. However, because of internal discrepancies in the government, the capitalization failed and the loan turned into Chernomorneftegaz’s debt to Kiev.

Odessa gas field – so far own, but someone’s else

EADaily has drafted a map of the northwestern part of the Black Sea based on data of Chernomorneftegaz in the period when it was yet a Ukrainian company. By those data, the Odessa gas field, which satisfies 60% of the peninsula’s gas demands now, is located closer to the Ukrainian coast. The UNCLOS says that two countries cannot extend their territorial seas beyond the median line, unless there is an agreement between them. Actually, under the Law on the Sea, the Odessa gas field is in Ukraine’s economic zone. This partly confirms the statement by Igor Shabanov, the head of Chernomorneftegaz, about its uncertain international legal status.

This statement also means that the Russian side is well aware of the situation, but prefers the status quo at least until the gas pipeline to Crimea is built. Since the recovery in the Black Sea is falling, Russia speeded up the construction of the pipeline to ensure gas supply to the peninsula by the heating season.

Losing the Odessa gas field, Crimea will become even more dependent on the gas pipeline, as the other fields are running low and no new ones are being explored.

Just gas or Crimea too?

It depends on what is written in Ukraine’s lawsuits against Russia whether the Odessa gas field will remain under management of Crimea or Russia will have to give it to Ukraine.

“Without the peninsula, Kiev may claim new ‘borders’ in the Black Sea. But it will mean that Kiev indirectly recognizes Crimea as part of Russia,” says Dmitry Marunich, co-chair at the Fund for Energy Strategies. He doubts that the authorities will do it. In his words, Ukraine will demand the entire Ukrainian sector of the Black Sea - the part it possessed before March 2014.

 “In such case, the chances to bring back the Odessa gas field will decrease, as Russia will have to recognize that it has annexed the peninsula. Otherwise, Moscow may go on concessions, the more so as the gas field is in the waters that only Ukraine has a right to claim,” Marunich says.

In such case, Russia will have to make concessions. It is UNCLOS that allows Moscow to claim the extension of its share of the Arctic continental shelf that is much more attractive than the Black Sea one. For instance, the reserves at the Odessa gas field totaled 20billion cubic meters, which is too little by Russian standards. If the case is linked to the claims for Crimea, the Court will simply refuse to consider the claim for lack of subject-matter jurisdiction, says Nikita Kulikov, Executive Director of Heads Consulting. “First, settle the dispute over Crimea, and then shift to the rights to the gas fields on the continental shelf,” Kulikov told Vzglyad newspaper.

Protract and shelve the case

It appears that Ukraine will follow the example of Romania that disputed the status of the Ukrainian Snake Island at the International Court of Justice in The Hague in 2004. Romania demanded a larger economic zone and control over potential oil and gas fields in the Black Sea. Then, Bucharest managed to get a significant part of the water area it had claimed. In 2009, the Court ruled transferring 9.7 thousand square meters out of the disputed 12 thousand square meters to Romania. Bucharest had already managed to issues licenses to oil and gas companies for exploration of the gas fields and last year a pool of companies led by LUKoil opened a field with 30billion cubic meters of gas reserves.

Alexander Proelss, Professor of Public Law, University of Trier, told Deutsche Welle Ukraine has a chance to win the case against Russia even if it claims the entire sector of the Black Sea it processes before March 2014. In his words, Ukraine has a sovereign right to recover and delegate the right to recovery of natural resources in the above zone. The expert in the maritime law is sure that Crimea’s “annexation by Russia” and nationalization of the company have in no way affected that sovereign right due to the principle of collective non-recognition. The German expert explains that the consequences of Crimea’s “annexation that is inconsistent with the international law must be considered as if there was no annexation at all.”

Other experts say the trial will take years. The International Court will note the claim only after the sides declare that the pre-trial consultations are over. “So far, only Ukraine has announced that the consultations are over, while we say they are not over yet. So, I think these proceedings are not promising,” Anatoly Kapustin, President of the Russian Association for the International Law, told RIA Novosti. In addition, under UNCLOS, the Tribunal consists of five arbitrators, two of which are selected by each party to the arbitration, the other three are selected mutually. This gives another chance to shelve the case of the Odessa gas field at least for a few years until the peninsula gets used to the fact that it receives gas from the continent.