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Russian energy giant Gazprom posted its biggest loss in at least a quarter century after gas sales more than halved in the fallout from Vladimir Putin’s war in Ukraine.
The Rbs 629 billion ($6.9 billion) loss in 2023 underscores how the Russian president’s invasion of Ukraine has devastated the state’s natural gas monopoly and led to a collapse in sales to Europe, its main source of revenue.
Gazprom’s revenue fell nearly 30 percent year-on-year to Rbs8.5 trillion, with gas sales falling to Rbs3.1 trillion from Rbs6.5 trillion in 2022.
Moscow-listed Gazprom shares fell more than 4.4 percent on the news. Most Russian analysts had expected a small gain.
Analysts said the losses showed Gazprom, once a cash-rich “national champion” that used its power over Europe’s energy supplies as a geopolitical weapon, had failed to adapt to the loss of the EU market.
Gazprom’s revenue from gas sales outside Russia fell from Rbs7.3 trillion in 2022 to Rbs2.9 trillion last year, a decline that analysts said was largely due to 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 European gas imports fell from 40 percent in 2021, the last full year before the invasion, to 8 percent in 2023, according to EU data.
The results show that Gazprom’s once core business – selling gas to Europe – has become a loss-making millstone, only partially offset by profits from oil sales, analysts say.
Profit from oil, gas condensate and petroproducts rose to Rbs4.1 trillion, up 4.3 percent year-on-year. This shows how Russian exporters have successfully navigated Western attempts to limit the Kremlin’s revenue from energy sales.
But these efforts were not enough to prevent Gazprom from losing money.
“The loss of revenue from Europe is an insoluble problem without a return to Europe,” said Craig Kennedy, a Harvard scholar and former vice chairman of Bank of America. “It was a cross-subsidy of the rest of the business and they are now finally being forced to show this in their accounts.”
The losses show how the war has made this prewar model untenable, Kennedy added.
The Kremlin has tried to avoid liberalizing domestic gas prices, forcing Gazprom to borrow to cover its growing losses.
“The state’s answer to that is simply: let’s borrow more,” he added.