Gazprom, the Russian energy giant, has seen a substantial decrease in its net profit following the Ukraine conflict, with a 41% decline. The primary reason for this decline is a tax increase. According to the company’s 2022 financial report, its profit dropped to 1.2 trillion rubles ($15 billion) from the previous year’s 2.1 trillion rubles.
In response to the drop in profit, the company has recommended withholding dividend payouts, as stated in a company statement reported by Russian news agencies. The increase in tax payments during the second half of the year directly impacted the profit margins, according to the statement.
Gazprom has been heavily affected by Western sanctions, which have targeted the state-owned enterprise led by Alexei Miller, a close associate of President Vladimir Putin. Consequently, European imports of pipeline natural gas from Russia saw a significant decline of 55% in 2022, according to the Gas Exporting Country Forum’s recent report.
To mitigate the limitations imposed by the European market, Gazprom has strategically turned its focus toward Asia, except for liquefied natural gas purchases. China, in particular, has become a crucial economic partner for Russia, especially after the West implemented unprecedented sanctions following Russia’s military intervention in Ukraine.
In March, Gazprom announced a record in daily gas volumes supplied to China via the Power of Siberia pipeline, with total deliveries reaching 15.5 billion cubic meters in the previous year.
However, redirecting gas exports to new markets requires the construction of costly infrastructure, which takes considerable time. Gazprom plans to start the construction of the ‘Power of Siberia 2’ pipeline in 2024, according to the report. As the owner of the largest gas reserves in the world and employing approximately half a million people, Gazprom remains a significant driver of Russia’s economic growth.
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