Financial problems of Russian Gazprom become systemic and increasingly noticeable impact not only on the company’s budget, but also on social stability in Russia. 2023 was the worst year for Gazprom in the last quarter of a century: the net loss reached 629 billion rubles (over $6.9 billion) – the first time since 1999 that the company ended the year in the red. Receipts fell by 27% – to 8.5 trillion rubles – primarily due to a sharp reduction in revenues from gas exports against the background of the loss of the European market.
At the end of last year, the situation only worsened. According to Russian accounting standards, Gazprom’s net loss exceeded 1.076 trillion rubles ($12.89 billion). This is already a systemic crisis: the company carries multibillion-dollar losses, loses markets and is forced to look for money to survive.
Due to financial difficulties, “Gazprom” plans cut down about 1,600 jobs in the central office in St. Petersburg – this is almost 2/5 of the head office staff. Under attack – the management unit, which for years personified the “gas empire”. At the same time, to compensate for losses, the company considers the possibility of selling luxury real estate, in particular, office premises in St. Petersburg.
The end of the gas era: Russia flew off the “gas needle” of Europe and found itself on the hook in China
On the eve of a full-scale invasion — in 2021 — in Russia exported about 185 billion cubic meters of gas, of which 4/5 was delivered to Europe. Currently, Russian gas exports are in a systemic crisis. Everything that Putin built for decades – a giant “gas needle” for Europe – was destroyed by the Kremlin’s own hands. The Kremlin invested Gazprom’s record profits in the development of the army and propaganda. It was this gas that financed the long Russian aggression in Ukraine.
But after February 24, 2022, the situation will change changed fundamentally. Europe began to sharply refuse Russian gas. In 2023, only 15% of gas in Europe will be of Russian origin. Gas transit through Ukraine has shrunk up to 15 billion cubic meters, and earlier it was more than 150 billion cubic meters.
Here is another important figure: transit through Ukraine last year was only 8% of the peak level of 2018-2019. Russia is simply falling out of the European market.
And Turkey? “Turkish Stream” works, but the volumes do not save the situation. In addition, Turkey is actively looking for alternatives.
This is economic degradation. Gas no longer feeds the empire. The Kremlin has launched a process that cannot be stopped: Russia is turning into a raw material appendage of China, and that too on Chinese terms.
Failure of “Power of Siberia – 2”: Kremlin begs, China humiliates
Against this background, the “saving straw” for the Kremlin seemed to be the reorientation of gas exports to China through the construction project of the “Power of Siberia – 2” gas pipeline. It was planned that it would allow the annual supply of up to 50 billion cubic meters of gas from Yamal, replacing the lost European market. But things are not easy here either: Beijing drags on negotiations, hammering out the most favorable terms for themselves, understanding Russia’s dependence on the new sales market. Instead of a profitable gas project, the Kremlin receives humiliation and the cold shower of geopolitics from Beijing.
China holds The Kremlin is on the hook for the third year. There is no contract and no construction consent. There are only promises and beautiful pictures on Kremlin TV. Pyndebesna realizes that Moscow has lost Europe and is now ready to hand over gas for a penny. China requires gas at prices close to domestic Russian prices, which means that Moscow will actually pay for the right to sell gas to Beijing. This is no longer a business, but a colonial model.
In addition, China is actively building LNG terminals (special infrastructure facilities for receiving, storing, regasifying or liquefying natural gas), pumping gas from Qatar, Australia, and the United States. After all, Beijing is not ready to become a hostage of one supplier. For China, Russia is only a tool for bargaining with other suppliers.
Cost “Forces of Siberia – 2” – from $10 to $13.6 billion. And all this for the sake of supplies of 50 billion cubic meters of gas per year. The profitability is doubtful, the benefit is zero.
The reality is this: even Mongolia and Central Asia are not eager to save Russia and its “Power of Siberia – 2”. The Prime Minister of Mongolia directly stated: there is no agreement there is no, the key issues have not been agreed upon, and the project is not included in the country’s development plans until 2028. This means one thing – the pipe hangs. Mongolia perfectly understands that playing on the side of the aggressor country is toxic. And the second reason: Beijing did not give the green light. And without the Chinese team, no one will invest in this adventure.
Turkmenistan in general plays up its game: pumping gas directly into China and building new capacities to capture the Chinese market even more. No one needs Russia here.
Moscow needs the project more than Beijing, and this makes the Kremlin a dependent player. The conclusion is simple: “Power of Siberia-2” is a dead end. The Kremlin has already lost. They lost Europe and are now begging China. But Beijing plays in the long run and crushes Russia in a gas vice. No one in the region wants to be part of Moscow’s gas colonial scheme.
The end of the “Gazprom” era: the USA, Qatar and Norway pushed Russia out of the market
The world gas market will never be the same after the Russian invasion. The Kremlin single-handedly destroyed Gazprom’s monopoly in Europe, and now the USA, Qatar and Norway are rapidly taking its place.
America has become the main beneficiary of the war – deliveries of American LNG to Europe are breaking historical records. For the second year running, the United States has held the title of the largest exporter of liquefied natural gas on the planet. Qatar was not far behind, signing long-term contracts with Germany, France and other eurozone countries. This laid a solid foundation for ousting Russia from the market for at least a decade to come.
In general, Norway has become a new gas donor to Europe – it has bypassed Russia and provides stable supplies. Production has been increased, contracts have been signed, the prospects are clear.
Europe in 2 years built There are more LNG terminals than in the previous 20. Investments are going at a crazy pace – Poland, Hungary and Slovakia implement projects for independence from Gazprom.
Europe launches the plan REPowerEU – not just a way out of dependence on Russia, but a complete restructuring of the energy industry for renewable sources. Green investments, energy efficiency, transition to hydrogen. In particular, negotiations and development of long-term strategies for the period from 5 to 10 years are ongoing.
What consequences will this have for the Russian economy? Currency income is falling rapidly. Gas exports to Europe in 9 months of 2024 collapsed by 41% – minus tens of billions of dollars that financed the army, repression and propaganda. Ruble falls down – 110 per dollar. This is the level of the beginning of the war, when even the Russian elite was shocked by the reality created by the Kremlin.
Regarding the social system, when there is no currency and imports, prices rise, business stops, people remain unemployed. The protest potential is growing. The system is based only on fear and security forces.
Next is the degradation of the gas industry itself. There is no money and technology, sanctions cut opportunities for the development of new deposits. And the old deposits are running out. This is stagnation. The resource curse is becoming a reality.
…The gas “superpower”, which the Kremlin was boasting about to the whole world yesterday, is falling in front of our eyes today. “Gazprom” – once a symbol of imperial ambitions – is rapidly sliding into unprofitable ballast. Instead of a gold mine – a hole in the budget. Instead of a lever of influence – a burden that drags Russia to the bottom. And who will now remind us what to be proud of?
Tetyana Viktorova
