Unlock the Editor’s Digest for free
Roula Khalaf, Editor of the FT, selects her favourite stories in this weekly newsletter.
Russian energy giant Gazprom plunged to its biggest loss in at least a quarter of a century after gas sales more than halved in the fallout from Vladimir Putin’s war in Ukraine.
The loss of Rbs629bn ($6.9bn) in 2023 underlines how the Russian president’s invasion of Ukraine has ravaged the state-owned natural gas monopoly, leading to plummeting sales to Europe, its main source of income.
Gazprom’s revenues fell almost 30 per cent year on year to Rbs8.5tn, with gas sales dropping from Rbs6.5tn in 2022 to Rbs3.1tn.
The company’s Moscow-listed shares fell more than 4.4 per cent on the news. Most Russian analysts had expected it to make a small profit.
Analysts said the losses showed how Gazprom, once a cash-rich “national champion” that used its stronghold over Europe’s energy supply as a geopolitical weapon, had failed to adapt to losing the EU market.
Gazprom’s revenue from gas sales outside Russia fell from Rbs7.3tn in 2022 to Rbs2.9tn last year, a drop analysts said was mostly driven by the loss of its European sales.
European countries, meanwhile, have had greater success than expected in finding alternative sources of gas: Russia’s share of Europe’s gas imports dropped from 40 per cent in 2021, the last full year before the invasion, to 8 per cent in 2023, according to EU data.
The results showed that what was once Gazprom’s core business — selling gas to Europe — had become a lossmaking millstone only partially offset by profits from its oil sales, analysts said.
Profit from oil, gas condensate, and petroproducts rose to Rbs4.1tn, up 4.3 per cent on the previous year, showing how Russian exporters have successfully navigated western attempts to limit the Kremlin’s revenue from energy sales.
But those efforts were not enough to stop Gazprom making a loss.
“The loss of revenues from Europe is an unfixable problem without going back into Europe,” said Craig Kennedy, a Harvard-affiliated scholar and former vice-chair at Bank of America. “It was cross-subsidising the rest of the business and they are finally being forced to show this in their accounts.”
The losses showed how the war had made this prewar model unsustainable, Kennedy added.
The Kremlin has sought to avoid liberalising domestic gas prices, forcing Gazprom to borrow to cover its mounting losses.
“The state’s response to them is just, let’s go borrow more,” he added.
Read the full article here
