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Energy relations between Russia and the West in wake of the $50 billion YUKOS case and the ongoing U

Partner Meeting with the Atlantic Council, Washington DC

20 October 2014, 4:30 - 6 PM local time

@ 1030 15th Street NW, Washington DC 20005

Russian energy, YUKOS and the West

No matter what side of the lingering East-West divide you may find yourself on, the names of Putin, Khodorkovsky, Sechin, the Kremlin, YUKOS, ROSNEFT, Gazprom and Co, have become part of the modern-day mantra of many serious a debate about the oil and gas markets. As "savory" as they may be, however, these names do not always make front-page news for the "right reasons". Indeed, the final decisions delivered by three arbitral tribunals constituted under the ECT and administered by the Permanent Court of Arbitration (PCA) in the Netherlands ruling against the Russian government in favor of former shareholders of the dismembered oil company, YUKOS, to the tune of $50 billion, serves as a harsh reminder of the high stakes involved in the oil and gas business. This may all be fine, as Kremlins and oligarchs go hammer and tong at each other. However, on this occasion, we need to consider the caveat that foreign investors also got into the game, and got hurt. Here, the ECT, the only multilateral investment protection instrument in the field of energy (including the oil and gas markets), stepped in. The arbitral tribunals ruled in late July that the Kremlin breached the ECT due to the manner in which it expropriated YUKOS assets and the rest, may, for now, be history.

Despite the Kremlin's denial of any wrongdoing, the rule of law has prevailed in a manner where Russia has been fined an amount equating to 2.5% of the country's GDP, 10% of the national budget, and 11% of its foreign exchange reserves. The aggregated amount awarded in favor of YUKOS shareholders is twenty times higher than the highest previous arbitral award ever made: making it the "mother of all awards". It now appears that Russia will do all that it can — at the political and legal levels — to abstain from payment. Yet Moscow now finds itself in an increasingly hostile international environment, in wake of the current standoff with the West over Ukraine. Its energy companies are already under enormous pressure from ongoing EU Commission investigations against Gazprom in Europe, as well as international sanctions against the Russian oil sector. That said, US and EU energy corporations remain exposed in Russia in no small way, risking a boomerang effect that may well slap us back in the face lest steady sails prevail in choppy international waters. While the risks remain at alarmingly high levels for all energy stakeholders, we have hardly even begun to mention that Russia had already switched off the taps (of the gas supply) to Ukraine back in June.

Which way will Russian next turn in its current energy and political standoff with the West? How will the YUKOS cases shape Russia's energy relations with governments and companies from the Euro-Atlantic area? Does the Energy Charter Treaty have the capacity to deflate some of the tensions? Is an energy security crisis looming in Europe given the ongoing Ukraine crisis and taking into account Moscow"s seeming efforts to heap pressure on Kyiv? During Ambassador Rusnak's assessment of this subject matter, he shared his personal experience on the topic taking into account his numerous meetings with top Russian energy and political decision-makers, including President Putin, Rosneft head Igor Sechin, Russian Energy Minister Alexander Novak, Gazprom's Alexander Medvedev, as well as Presidents and Ministers of other ex-Soviet states. He discussed how the rules and procedures of global energy governance have, in their way, humbled the Russian government in wake of the dismemberment of one of the world's largest oil companies, and offered invaluable advice to Western energy leaders as they prepare for the rocky road that still lies ahead of us.


  • Setting out the debate by David Koranyi, Deputy Director, Dinu Patriciu Eurasia Centre, Atlantic Council, and Dr. Marat Terterov, Executive Director, Brussels Energy Club

  • Presentation by Ambassador Urban Rusnák, moderated by David Koranyi

  • Open discussion and Q/A session with Ambassador Rusnák

  • Light cocktail and networking opportunities with the speakers (cocktail may run late)

Summary of the meeting:


Secretary-General, Energy Charter Secretariat, Brussels



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