Originally from The American Review of International Arbitration (ARIA)

PREVIEW PAGE

I.     INTRODUCTION

In 2022 virtually every industry felt the effects of the war. One of the sectors that was hardest hit was the energy industry. Global energy prices have been steadily rising since mid-2021 as the economies recover from the COVID-19 pandemic, causing energy markets to shrink. Just before the 2022 full-scale invasion of Ukraine, wholesale gas prices were around 200% higher than the year prior (February 2021). Wholesale electricity prices have followed a similar pattern, according to the European Commission.  During the same period, a substantial part of EU energy imports came from Russia—40% of gas imports (gas makes up one-third of Europe’s energy use), 27% of crude oil imports,  46% of hard coal imports in 2021 —making Europe heavily reliant on Russia.

In these circumstances, the February 2022 invasion put unprecedented pressure on the EU energy market.

II.    GAS SUPPLY SUSPENSION

After February 24, 2022 a tsunami of sanctions came down upon Russia, its state companies, and individuals. The gas supply, however, was not embargoed. In late March 2022, Russia announced that the contracts in force at that time would be performed and that the gas supply would continue.  At the same time, to ensure that the payments could be made (given that the euro and the dollar are the two main currencies of Russian gas supply contracts), the currency of the contracts would be unilaterally changed to rubles.  The unilateral change concerned buyers from ”unfriendly” countries.  The announcement was formalized in the form of a Presidential Decree on March 31, 2022 (the Decree).