Russia's gas giant Gazprom struggles as losses mount
Gazprom is facing financial losses and is appealing to authorities for household gas price increases, as well as a rise in transportation tariffs for independent Russian suppliers. "The company was sacrificed on the altar of Putin's imperial ambitions," commented Filip Rudnik, an analyst at the Center for Eastern Studies, in an interview with money.pl.
The economic crisis in Russia is becoming more pronounced as the third year of the war in Ukraine comes to an end. According to Interfax, a Kremlin agency, senior Gazprom manager Alexei Sakharov discussed the necessity of radical gas price hikes in the Russian parliament.
"In Russia, gas prices should be elevated to ensure the implementation of large investment projects. The current wholesale gas price levels do not meet Gazprom’s needs and do not provide sufficient resources for necessary investments and infrastructure development for Russian consumers," explained Alexei Sakharov during an expert panel in the Duma.
Sakharov also mentioned that the average transportation tariff for independent suppliers is 65.2 rubles per thousand cubic meters for every 62 miles, which does not even cover the current costs of 109 rubles. This indicates that the company is transporting gas consumed by Russians at a loss. The gas transport rates have not been updated since 2015. It's important to note that this concerns tariffs regulated for the Russian market, not for international exports.
"To ensure financing for new projects, a rate increase to about 170 rubles is necessary," Sakharov added.
In 2023, for the first time in over two decades, Gazprom recorded a financial loss, as highlighted by Reuters. The company faced a $7 billion loss, and by the first three quarters of 2024, a $3.2 billion loss was reported. We await the full-year data.
Gas prices "at retail" have risen sharply during the war
Gazprom is struggling despite price hikes for Russian households and companies. The independent "Moscow Times" reports that since the start of the war in Ukraine, gas tariffs for Russian customers have significantly increased. "From July 1, 2025, another raise of 10.2 percent is planned, with the cumulative increase in gas prices reaching 37 percent since the invasion began. In 2025, gas costs for businesses will increase even more—by 21.3 percent."
We asked experts for comments on Gazprom's appeal for further hikes. Analysts link it to the economic crisis and the impact of the war in Ukraine on Gazprom itself.
Gazprom was sacrificed in 2022 for Putin's imperial ambitions. Now, under wartime conditions, it is struggling further. Russians have long been accustomed to cheaper gas. Gazprom benefited from the surplus of gas deliveries to EU countries, which compensated for its lower prices in Russia," said Filip Rudnik, an expert on Russian economic affairs at the Center for Eastern Studies, to money.pl.
According to the analyst, further price increases for Russians are inevitable. "They will attempt various manipulations. It's important to emphasize that other supply routes, such as to China, do not make up for what Russia lost in Europe (only the Turk Stream pipeline to southern European countries remains). The Kremlin is counting on the Power of Siberia pipeline to China, but the Chinese demand prices similar to those in Russia," the analyst added.
The "Financial Times" reported last year that despite building the second line of the Power of Siberia, negotiations for a large gas deal between Russia and China have stalled. "Gazprom has no market for its gas," Filip Rudnik explained.
The halt of gas transit through Ukraine, which occurred on January 1, 2025, will result in Gazprom losing approximately $6 billion annually, assessed American gas and oil market analyst Ronald Smith, cited by the "Moscow Times."
"Gazprom is becoming a burden on Russia's budget"
Aleksandra Kozioł, an analyst at the Polish Institute of International Affairs, emphasized in an interview with money.pl that "although Gazprom aims to maintain gas sales to Europe and preserve its role as a significant European partner, this assumption is unrealistic."
Gazprom lacks the capacity to transmit gas to Europe. Nord Stream and Yamal are not operational, and the transit agreement with Ukrainian Naftogaz expired earlier this year. The EU is also uninterested in purchasing Russian gas, and the European Commission plans to completely withdraw from it by 2027, making the current activation of existing pipelines unrealistic, let alone building new connections," commented the PISM expert.
Aleksandra Kozioł assessed that "Gazprom is gradually becoming a burden on the Russian budget," pointing to planned mass layoffs (TASS agency reports that 1,500 employees at the company's headquarters, which currently employs 4,100 people, are expected to lose their jobs). It's no wonder Gazprom is pressuring Russian authorities to raise domestic gas prices, she concluded.
However, preferential gas prices are a crucial element of the social contract in Russia, where authorities provide benefits in return for political support. As a result, gas prices will continue to be artificially regulated to avoid provoking social unrest," she emphasized.
She also noted that liberalizing gas prices in Russia is unfeasible due to its inflationary impact on the Russian economy. "The authorities are trying to prevent this at all costs, prioritizing wartime production," she concluded.
Reuters: Putin may lean towards ending the war
On Thursday, Reuters reported, citing "five anonymous sources close to the Kremlin administration," that Russia's deteriorating economic situation might prompt the Kremlin to consider peace negotiations to end the war. According to these sources, the opinion of "achieving war goals" is becoming more frequent, focusing on establishing a land connection between Russia and Crimea and weakening Ukraine's military. Kyiv has so far rejected any territorial concessions to Russia.
Reuters assesses that while Russia's economy, valued at $2.2 trillion, recently demonstrated resilience during wartime, the situation has become tense in recent months due to labor shortages and high-interest rates implemented to combat inflation accelerated by record military spending.
The economic crisis is increasingly acknowledged within the Kremlin itself. "The Russian economy is stable and maintains a relatively high pace of development despite certain challenges," Kremlin spokesperson Dmitry Peskov told Reuters. Former vice-president of Russia's central bank, Oleg Vyugin, said that Russia is interested in a diplomatic resolution to the war "for economic reasons."
Bartłomiej Chudy
