Decline of Russia’s Gazprom: Putin’s dream fails (translation in comments)

8 comments

1. Translation:

   After decoupling from the European gas market, Vladimir Putin wanted to sell his raw materials to Asia. But the plan is not working – and Gazprom is in a serious crisis. This has consequences for the Russian war chest.

   “Dreams come true.” That is the corporate slogan of Russian gas giant Gazprom. You might not call it a dream, but Russian President Vladimir Putin at least had a clear idea of what would happen after Russia invaded Ukraine in 2022 and the majority of European countries decoupled from the Russian gas market: while exploding gas prices in Europe would trigger revolts in the Kremlin’s interests, Putin wanted to sell his gas to Asia and China in particular. In the end, the Europeans were supposed to beg him to let Russia resume supplies of raw materials.

   This dream did not come true. Two years ago, former president and Putin confidant Dmitry Medvedev predicted an explosion in gas prices in Europe – they were set to rise by around fifty times their pre-war average. Prices did indeed soar for a short time. However, the price in Germany, for example, now stands at 7.8 cents per kilowatt hour. That is as little as in October 2021, four months before Putin’s invasion of Ukraine began.

   While Europe can at least breathe a sigh of relief on the gas front at the moment and oil prices are also falling again, the former Russian flagship company Gazprom is on the ropes. At the beginning of May, the state-owned company reported a net loss of 629 billion roubles (almost 6.4 billion euros) for 2023 – the highest net loss Gazprom has recorded since 1999. The reason: the development of new markets is not going well, and cooperation with China is also faltering in many areas.

   Putin has miscalculated and alarm bells are ringing in the Kremlin. If he does not get to grips with the problem, the lack of profits from raw materials deals could significantly affect the financing of his war from next year.

   This development is also interesting because Russian gas transactions are not affected by EU sanctions. Rather, the Russian leadership stopped gas deliveries in 2022 in order to exert pressure on Germany and other countries. At the time, the Russian president wanted to show who had the upper hand and take advantage of the dependencies that the German economy had by getting used to cheap Russian raw materials.

   But Gazprom was not only Putin’s weapon in the raw materials war against the West. Excluding dividends, the company transferred at least 40 billion US dollars to the Russian state treasury in 2022 – either for the state budget or the National Welfare Fund (NWF). This is no small matter; after all, Gazprom was still responsible for ten percent of the Russian state budget revenue two years ago. These revenues filled Putin’s war chest.

   Wars are expensive – and the Russian war of aggression in Ukraine has been going on for much longer than the Kremlin had originally planned. This is why Putin needs money, and the Kremlin has asked Gazprom to pay a monthly levy of 500 million US dollars to the state until 2025. However, it is currently completely unclear whether the company can afford this share of the NWF.

   This is becoming a problem for the Russian leadership. At the moment, the Russian economy is doing so well mainly because the state is massively subsidizing the expanding arms sector: Tanks, missiles, soldiers’ pay and for those left behind should they fall in Ukraine. The workers in arms factories produce armaments around the clock, in three shifts. This has the side effect that part of Russian society has significantly more money than before the war. Nevertheless, all of this is primarily paid for by the Russian state.

   Putin set up the NWF in 2008. For years, money from Russian commodities transactions flowed into the fund. Putin’s war is now slowly depleting these reserves, with half of them – around 60 billion US dollars – reportedly already gone. And as a reminder: when commodity prices initially rose in 2022, Gazprom still made a profit of almost 12.5 billion euros that year and was therefore able to pay more into the NWF.

   Now the company and the Russian state are facing a problem: either the gas giant pays less money into the prosperity fund in future or reduces planned investments in gas fields and pipelines. This would have a massive impact on Russian economic growth.

   … continued in reply to this comment

2. but still their war chest is being replenished by sale to emerging asian economies india and china which is not good.

3. What a dumbass “leader.”

   First he slowed down gas deliveries to Europe, then he demanded to be paid in rubles, then they started to shut down gas pipelines.

   And now his prized gem is in deep trouble because Europe was like “well ok then, I guess we will buy from other countries.”

   He pretty much forced Europe to diversify while thinking it would give Russia leverage.

   The only people dumber than him are the people who claimed he was a 5d chess genius for forcing European countries to pay in rubles. Lmao. There’s no hope for their brainrot.

4. The current prices also reveal that Russian gas wasn’t actually the “generous gift” that many German politicians like Schröder have touted it to be.

   He still claims that Germany has profited a lot from the exceptionally cheap and reliable Russian gas. Now it turns out that gas prices have actually reached the same level that Germany had with Russian gas but just buying from other countries.

   This means Germany could have reached the same prices without funneling money to one of the most evil dictatorships the World has seen in the last 80 years.

5. This is hopium. Russia has fantastic economic indicators, much better than any other western nation. Even war and sanctions didn’t stop Russia giving account surplus.
   https://tradingeconomics.com/russia/current-account-to-gdp

   Russia is a gigantic resource provider since medieval times. Plundering Asian continent first for game meat, furs and now with raw materials and energy products. Russia owns the gates of Asian continent and all its riches without any competition.

   Don’t expect Russia to run out of money any time soon.

   This war of attrition will cripple Russian economy not because of lack of money but lack of ammunition, weapons and man power. Russia will run out of them because its economy, people are not productive and its technology is behind West. They will continue to import what they need but with sanctions their access to markets are limited.

   US is another resource rich country but with advanced technology and economy. This is why US is super power while Europe is ailing after they loat their colonies.

   Russian budget deficit is not important. Russia has very low debt and they can always tax more.

6. Great job Putin !

7. I have been thinking about this a lot and I don’t know if my theory is correct.

   In December it’s ruzzian payday. They historically have to fix their books then. Last year they had to plug a deficit of 38$B of which they used 32$B from the NWF. If we are to believe rosstat which we shouldn’t. They have around 32B$ worth of Yuan liquid assets left. The rest of the NWF is semi liquid Gold and illiquid assets.

   So if we assume they have the same deficit or higher this year December they would have to use all the liquid part of the NWF.

8. The oil is still there, the equipment to get it still exists, and someday, someone will buy it.