Gazprom Suffers Record Loss as Russian Gas Exports to Europe Plummet

Gazprom, Russia's state-owned energy giant, has reported a staggering loss of 629 billion rubles (£5.5 billion) in 2024, marking its worst financial performance in at least 25 years. Therecord lossis a humiliating blow for the company and the Putin regime, as Russia grapples with the consequences of its illegal war in Ukraine.

Why this matters: The decline of Gazprom's fortunes has significant implications for Russia's economy and its ability to exert influence in the global energy market. As Russia's energy exports dwindle, it may lead to a shift in the global balance of power and have far-reaching consequences for international relations.

The significant decline in Gazprom's fortunes can be attributed to the sharp drop in Russian gas sales to Europe. Prior to the war, Russia supplied over 40% of the European Union's gas imports. However, following the invasion of Ukraine, Europe has taken decisive steps to diversify its energy sources and reduce its reliance on Russian gas. In 2022, Russian gas imports plummeted to a mere 8% of the EU's total, and further declined to under 43 billion cubic meters in 2023.

Europe's shift towards liquefied natural gas (LNG) has played a crucial role in this transition. The continent has successfully established new networks to import LNG, adding capacity to import an extra 40 billion cubic meters last year and planning to add another 30 billion this year. The United States, Qatar, and other countries have stepped up their LNG exports to Europe, helping to fill the void left byRussian gas. "Previously it was stable, steady and reasonably cheap pipeline gas, and they have managed to build the infrastructure to import liquefied gas from global markets,"explains Bill Weatherburn, commodities specialist at Capital Economics.

Gazprom's struggle to find new customers has compounded its financial woes. Plans to expand into the Asian market have faced significant challenges, with Western sanctions hindering the company's attempts to build LNG terminals. While Gazprom has diverted some gas to China and Uzbekistan, these efforts have failed to compensate for the loss of the lucrative European market.

The record loss has sent shockwaves through the Russian economy, with Gazprom's shares falling as much as 4.4%, the steepest decline in more than a year. TheRussian central bank, holds, key, is under immense pressure due to rising military spending and crippling Western sanctions aimed at hammering Russia's economy over its actions in Ukraine.

Despite the bleak financial results, Russia expects its gas shipments via pipelines to foreign markets to increase by 18% this year to 108 billion cubic meters compared with 2023. However, experts warn that Gazprom's loss of the European market cannot be offset by increased supplies to China via the Power of Siberia link. The company's revenue and investments remain under pressure as the conflict in Ukraine persists and Western sanctions continue to take their toll.

Key Takeaways

• Gazprom reports record loss of £5.5 billion in 2024, worst in 25 years.
• Russian gas sales to Europe plummet due to Western sanctions and diversification.
• Europe shifts to liquefied natural gas (LNG) from US, Qatar, and others.
• Gazprom struggles to find new customers, especially in Asia, due to sanctions.
• Russian economy feels the impact, with Gazprom shares falling and central bank under pressure.