For the first time in more than 20 years, Russian energy giant Gazprom has reported a financial loss. Analysts say the multi-billion dollar loss is a sign that Western sanctions are taking effect and that turning to China is not compensating for lost European revenues.
The energy company is running a $7 billion deficit due to a sharp drop in trade with European countries and sanctions imposed because of the war in Ukraine.
Gazprom and the Russian economy have responded to the sanctions by turning to India and China, but this has not compensated for the lost European markets. The company’s problems reflect the limitations of Moscow’s partnership with China, according to a report from Reuters. The constraints persist despite Moscow’s deft response to sanctions, with the country known to divert its seaborne oil exports to other buyers.
In 2022, the first year of the war, it shipped some 63.8 billion cubic meters of gas to Europe. Last year, this fell by a further 55 percent to 28.3 billion cubic meters.
The figure is particularly dramatic compared to the peak in 2018 when Gazprom sent more than 200 billion cubic meters to the EU and other countries such as Turkey. Russia, which is turning to China in the wake of the West’s moves, is aiming to increase pipeline gas sales to 100 billion cubic meters a year by 2030 through the Power of Siberia pipeline and its planned new branch.
The target for this year is only 38 billion cubic meters, while pipeline No. 2, which is not yet operational and will pass through Mongolia, will export 50 billion cubic meters.
However, exports to China are not an entirely smooth process for Russia.
“Although Gazprom will have some additional export revenues, it will not be able to fully compensate for the lost business in Europe,” says Kateryna Filippenko, director of gas and LNG research at Wood Mackenzie.
