Russia’s Gazprom Sales Plumet Due to Ukraine War, Recovery Uncertain

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Russia’s Gazprom Sales Plumet Due to Ukraine War, Recovery Uncertain

Pipeline valve with manometer (© Shutterstock/Krasowit)
Pipeline valve with manometer (© Shutterstock/Krasowit)

Russia's gas giant Gazprom faces a bleak future, with a potential long-term decline in market share and influence, according to a report commissioned by the company's own executives.

A report, cited by the Financial Times on Wednesday, June 5, 2024, suggests Gazprom may never fully recover from the fallout of Russia's invasion of Ukraine. 

European sanctions and a shift away from Russian gas have significantly impacted Gazprom's sales volumes and revenue.

"The main consequences of sanctions for Gazprom... are the contraction of export volumes, which will be restored to their 2020 level no earlier than in 2035," the Financial Times quoted the report's authors as saying.

Prior to the war, Russia supplied roughly one-third of Europe's gas. Last year alone, Gazprom's pipeline exports to Europe dropped by more than half (55.6%) compared to 2022. 

This decline, coupled with pricing pressures, resulted in Gazprom's first annual net loss in 23 years.

The report downplays the ability of increased pipeline sales to China to offset European losses. Negotiations for a second pipeline remain stalled due to pricing disagreements. 

Additionally, Gazprom lacks the technology for large-scale liquefied natural gas (LNG) production, limiting its role in the growing global LNG market.

To maintain domestic dominance, the report suggests Gazprom seek preferential treatment from the Russian government and leverage its monopoly on the country's natural gas transportation infrastructure.

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