re: Latest Updates: Russia-Ukraine Conflict

British Defence Intelligence
INTELLIGENCE UPDATE
UPDATE ON UKRAINE
12 May 2024

Gazprom, one of Russia's state-owned energy companies, has reported its biggest annual loss for 25 years. Gazprom's revenues fell by around 30 per cent in 2023, leading to an annual net loss of approximately 629 billion roubles (USD $6.9 billion).

The Russian invasion of Ukraine in 2022, and subsequent degradation of Russia's relationships with the West, has severely constrained Gazprom's operations. Gazprom's failure to fully re-orientate its exports away from its dependence on European markets will likely continue to restrict its profits until at least 2030. Whilst Gazprom has been able to divert some of its trade to alternative markets, due to infrastructural limitations, these likely only accounted for 5 to 10 per cent of the lost European sales in 2023. It is highly likely that an increase in future sales is reliant on construction of new export infrastructure, such as the 'Power of Siberia 2' gas pipeline.

High taxation on Gazprom's revenues in 2022 and 2023 has almost certainly reduced the ability and incentives for Gazprom to invest in its expansion to alternative markets. In 2023, Gazprom paid an estimated 2.5 trillion roubles (USD $28 billion) to the Russian budget, approximately 9 per cent of total government revenues. The Russian government plans to further increase the tax burden on Gazprom in 2024, which likely contributed to Gazprom's decision to cut its investment for 2024 by around 15 per cent.