The Kremlin-controlled energy giant Gazprom has faced a remarkable setback, reporting its first annual loss in over two decades. This financial downturn comes as a consequence of plummeting gas sales, with volumes more than halving following Vladimir Putin’s military intervention in Ukraine.
In 2023, Gazprom recorded a staggering net loss of 629 billion roubles (£5.5bn), reflecting the severe decline in gas trade with Europe, historically its primary market. The company’s operations were profoundly affected by sanctions and gas flow restriction through pipelines to the continent.
This downturn marks a stark reversal for Gazprom, once a symbol of Russia’s economic might and political influence, especially in its dealings with neighboring countries like Ukraine and Moldova. Analysts had anticipated a net income of 447 billion roubles, highlighting the unexpected severity of the company’s financial woes.
Gazprom (Credits: The Guardian)
The loss in 2023 contrasts sharply with the substantial net profit of 1.2 trillion roubles recorded the previous year. Gazprom’s troubled financial history includes losses in the late 1990s, exacerbated by foreign currency debt and economic turmoil following the 1998 financial crisis.
The decline in Russia’s gas exports to Europe, exacerbated by geopolitical tensions stemming from the conflict in Ukraine, has been a major factor in Gazprom’s financial struggles. The company, which holds a monopoly on gas exports, has been particularly hard hit by Western sanctions.
In mid-2022, Gazprom strategically reduced gas supplies to Europe through key pipelines like Nord Stream 1. The subsequent closure of the conduit from Siberia to northern Germany further compounded the company’s woes.
Gazprom plunges to first annual loss in 20 years (Credits: Al Jazeera)
While disruptions initially drove gas prices to near-record highs, European countries managed to secure alternative sources of supply, including imports from the US and Qatar.
Gazprom’s core profit, as measured by earnings before interest, taxes, depreciation, and amortization (EBITDA), saw a serious decline, falling to 618.38 billion roubles in 2023 from 2.79 trillion roubles in 2022. This represents the lowest EBITDA in over two decades, signaling a challenging period for the company.
The decline in natural gas supplies to Europe was stark, with Gazprom reporting a 55.6% drop to 28.3 billion cubic meters in 2023. The company’s failure to publish export statistics further underscores the depth of its financial struggles despite shifting geopolitical dynamics and economic pressures.
