Espreso. Global

Russia's Gazprom records largest annual losses in 25 years: British intelligence reveals why

12 May, 2024 Sunday
17:26

Russia's invasion of Ukraine and the souring of its ties with Western nations have severely curtailed the operations of Gazprom, one of Russia's state energy firms

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This is according to a report from the UK Ministry of Defense.

The report highlights that Gazprom suffered its biggest annual losses in 25 years this year. In 2023, the company's revenues plummeted by approximately 30%, resulting in an annual net loss of around RUB 629 billion (USD 6.9 billion).

"The Russian invasion of Ukraine in 2022, and subsequent degradation of Russia's relationships with the West, has severely constrained Gazprom's operations. Gazprom's failure to fully re-orientate its exports away from its dependence on European markets will likely continue to restrict its profits until at least 2030," stresses the British intelligence agency.

The agency also observes that although Gazprom has managed to redirect some trade to alternative markets, infrastructure constraints mean these are likely to only compensate for 5% to 10% of lost European sales in 2023.

"It is highly likely that an increase in future sales is reliant on the construction of new export infrastructure, such as the 'Power of Siberia 2' gas pipeline," the report states.

It further notes that the high taxation of Gazprom's profits in 2022 and 2023 has significantly reduced the company's ability and incentives to invest in expanding into alternative markets. Last year, Gazprom contributed approximately RUB 2.5 trillion (USD 28 million) to the Russian budget, constituting around 9% of total government revenues.

"The Russian government plans to further increase the tax burden on Gazprom in 2024, which likely contributed to Gazprom's decision to cut its investment for 2024 by around 15 percent," concludes British intelligence.

  • In April, reports emerged indicating that Russia's Gazprom posted a net loss of RUB 629 billion (nearly USD 6.7 billion) for 2023, compared to a net profit of RUB 1.226 trillion (about USD 13 billion) in 2022.
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