Russia, Gazprom | Blood-red numbers reveal the real cost of Putin’s war

The state-owned company Gazprom took a big hit in 2023. The accounts show that the Russian gas company had a net loss of a staggering 629 billion rubles in 2023, which corresponds to NOK 75 billion at today’s exchange rate.

Gazprom has had a monopoly on pumping Russian gas to the European market. But the invasion of Ukraine in 2022 and subsequent Western sanctions have caused the company to suffer enormous financial losses.

“Gazprom’s financial results for 2023 are the worst in 25 years, revealing the real costs of the Russian war for the Russian gas giant that has no alternative foreign markets for its supplies,” writes Jakub M. Godzimirski on https://twitter.com/jmgnupi/status/1786272360368066724.

Godzimirski is a senior researcher at Nupi and has been researching Russian relations for several decades.

– A third of Russian gas production has historically been exported abroad in recent decades because there is not a large enough market within Russia. Gazprom has exported between 150 and 200 billion cubic meters per year through several pipelines that were built between Russian gas fields and Europe, says Godzimirski to Nettavisen.

– The beard in the mailbox

Godzimirski says that Gazprom began to kneel as early as 2020 due to the pandemic, but emphasizes that it was the Ukraine war and Western sanctions that really set in the shock.

– Ever since the 1980s, Russia has focused on developing infrastructure with the intention of connecting large gas fields from Western Siberia to customers in Europe, but was unwilling to build infrastructure for other markets. When the West imposed sanctions on Russia after the invasion of Ukraine in 2022, Russia was left with its beard in the mailbox because it lacked markets for its gas, he says.

According to Reuters calculations, the supply of natural gas to Europe has plunged by 55.6 per cent in 2023.

Godzimirski says that Gazprom has made most of its money by selling gas to precisely the European market, which in turn subsidized the gas to the domestic market.

– When these European markets disappeared, Gazprom had to swallow many camels, and they have lost a lot of money. Russia exports some gas to China through the “Power of Siberia” gas pipeline, which runs from Eastern Siberia to China, he says.

– But these gas fields are not the same gas fields that supplied the European market. This means that gas from these large gas fields in the west does not have access to other markets, says Godzimirski.

– What does this mean for Putin and his warfare?

– This means a loss of income. When Gazprom makes a loss, less tax is paid. But gas is not the most important source of income for Russia. It is the oil that accounts for the most important income for the Russian state, he says.

Godzimirski says that it is easier to transport oil by ship than it is to transport gas by ship.

He says that Russia has managed to circumvent Western sanctions on Russian oil transport by using so-called “shadow fleets”. That means hundreds of oil tankers that sail under the sanctions radar and deliver oil to potential customers.

– There is still a long way to go until the Russian treasury is empty, he says.

– First annual loss since the 1990s

The operating results () plunged from 2,790 billion rubles (about NOK 332 billion) in 2022 to 618.38 billion rubles (about NOK 73 billion) in 2023, Reuters’ calculations show.

According to Reuters’ analysis, this is Gazprom’s first annual loss since the late 1990s. The company had a net profit of 1,200 billion rubles in 2022 (which corresponds to approximately NOK 142 billion).

Gazprom has been one of the most successful Russian companies since the fall of the Soviet Union, and has, among other things, been used as a means of pressure to resolve neighboring disputes with, for example, Ukraine and Moldova, writes The Guardian.