Gazprom may not anticipate recuperation until the year 2035.
Gazprom, the massive Russian gas company, might take up to a decade to recover from the effects of the Ukraine conflict and Western sanctions, a confidential report to its board reveals. The document suggests that by the year 2035, Gazprom will only ship 50-75 billion cubic meters of natural gas to Europe, which is significantly less than a third of what they used to send before the war.
This report indicates that the Western sanctions are more detrimental to Gazprom than the Russian government acknowledges. Elina Ribakova, the Senior Fellow at the Peterson Institute for International Economics in Washington, summed up the situation for the Financial Times: "It's very bleak. Gazprom is in a dead end, and they're aware of it."
These restraints have cut Gazprom off from essential technology pieces, such as turbines which help gas transport via pipelines, as well as the spares and expertise required for these turbines' maintenance. Gazprom has also lost several vital sales markets, imposed upon them by Western countries after Russia's actions in Ukraine.
If Gazprom fails to secure fresh markets, its significance will dwindle. Additionally, the Nord Stream pipelines were seemingly sabotaged in September 2022, damaging the main delivery route for gas to Europe. Europe had been a vital export destination for Gazprom for years.
Russia seeks to grow gas exports to China. Negotiations about the expansion of the "Power of Siberia 2" pipeline, which would bring gas from Siberia through the Mongolian steppe to Northern China, are currently stalled.
In contrast to pipeline-transported natural gas, analysts predict increased exports of liquefied natural gas (LNG). The report anticipates an increase in exports to 98.8-125.8 billion cubic meters by 2035. In 2022, Russia shipped out 40.8 billion cubic meters of LNG. However, Gazprom won't be the one to profit; instead, Novatek, the LNG producer of Russia, will reap the benefits. The report claimed that LNG could turn into a more secure source of export income for Russia in the future, owing to its transportation on ships rather than pipelines, making it more difficult to track.
Gazprom recently registered a record annual loss. The state-owned company's net loss reached 629 billion rubles (about 6.4 billion euros) in May 2023. In 2022, Gazprom revealed a profit of 1.23 trillion rubles (almost 12.5 billion euros) according to their own data. To preserve its position in the internal gas market, Gazprom must request favorable treatment from the Kremlin, the report suggests.
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Despite the Western sanctions and the impact of the Ukraine conflict, Russia continues to face sanctions on Gazprom, hindering their ability to acquire necessary technology and expertise for gas transport. The sanctions have also led to the loss of several vital sales markets for Gazprom.
The report also suggests that Gazprom's significance may dwindle if they fail to secure fresh markets, given the damage caused to the Nord Stream pipelines and Russia's reduced gas shipments to Europe.
