Gazprom's Orenburg gas processing plant

Gazprom Records First Annual Loss in Over 20 Years Amid Europe Sales Decline

In a significant financial downturn, Gazprom, Russia’s state-owned gas giant, has reported its first annual loss in over two decades, amounting to 629 billion rubles ($6.9 billion) for the year 2023. This stark decline comes as sales to Europe witnessed a drastic collapse following Russia’s military intervention in Ukraine.

The announcement of the earnings on Thursday underscores the profound challenges faced by Gazprom, a stalwart of Russia’s economic landscape. Analysts, anticipating a net income of 447 billion rubles ($4.9 billion) for the year, were taken aback by the staggering loss incurred by the company. Notably, Gazprom had reported a net profit of 1.2 trillion rubles ($13.1 billion) in the preceding year, just as Russia initiated its full-scale invasion of Ukraine.

This marks Gazprom’s first annual loss since the late 1990s or early 2000s, coinciding with the tenure of Alexei Miller, a close ally of President Vladimir Putin, who assumed leadership of the company in 2001. The late 1990s witnessed Gazprom grappling with significant financial turmoil, exacerbated by foreign-currency debt and the economic fallout of the 1998 financial crisis.

The decline in Russia’s gas exports to Europe, historically its primary export market, has been a major contributing factor to Gazprom’s financial woes. Political tensions stemming from the Ukrainian conflict have soured relations, resulting in a sharp drop in gas supplies to Europe by 55.6% to 28.3 billion cubic meters in 2023, according to Reuters’ calculations.

Furthermore, Gazprom’s core profit, as measured by earnings before interest, taxes, depreciation, and amortization (EBITDA), plummeted to 618.38 billion rubles ($6.7 billion) last year, down from 2.79 trillion rubles ($30.4 billion) in 2022. Ronald Smith from Moscow-based brokerage BCS Global Markets described the EBITDA as the worst in 22 years.

The company’s financial outlook remains uncertain amid ongoing geopolitical tensions and the enduring impact of Western sanctions, underscoring the formidable challenges ahead for Gazprom in navigating turbulent economic waters.

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