Not all sanctions are the same, and some have a greater impact than others. In the field of natural gas, a giant Russian state company is facing a problem

It was Russia's largest company and one day aspired to become the world's largest, but Vladimir Putin's plans completely changed Gazprom's direction. A report commissioned by the natural gas giant's executives suggests it will take the company at least a decade to regain pre-war revenues.

According to the study conducted for the company, the former main supplier of European natural gas will supply “only” between 50 and 75 billion cubic meters annually in 2035. This value is slightly more than a third of what was supplied before the Russian invasion. Ukraine.

This means that the Russian public company, formerly known as Kremlin Bank, will not reach 2020 revenue levels again until 2035, according to the Financial Times.

Gazprom's position became more complicated after the suspension of the deal to build a new gas pipeline to China, after Moscow considered the restrictions imposed by Beijing “irrational” compared to the prices and required supply levels.

China requires Russia to have natural gas supplies similar to those paid on the Russian market, which has great support from the Kremlin. Moreover, Beijing appears uncomfortable with purchasing the entire planned annual capacity and wants to commit to purchasing only a portion of it. This agreement was one of the main topics of the meeting between Xi Jinping and Vladimir Putin last month.

Combined with the dramatically low prices China is paying, building this pipeline will not be the answer to all the problems Gazprom faces. It is known that the Siberian Power 2 station will have the capacity to supply 50 billion cubic meters annually, a figure much lower than what was previously supplied to Europe.

“The main consequences of sanctions on Gazprom and the energy industry are the contraction of export volumes, which will not be restored to the 2020 level before 2035,” the authors of the document prepared at the end of last year wrote.

The economic sanctions imposed by the European Union have particularly affected the company, due to the way in which raw materials are exported. Unlike oil, which is transported in barrels by sea, exporting natural gas requires a gas pipeline or liquefaction structure. Almost all of Russia's gas pipeline infrastructure crosses the European continent towards its industrial heartland.

In order to direct natural gas production to other markets, it is necessary to create these infrastructures, and in this area, China presents itself as one of the only viable alternative markets. The 151-page report highlights that natural gas sales will continue to decline, with LNG taking the lead.

The results of the investigation appear to be consistent with the company's operating results for 2023. The state-owned giant company went from astronomical profits to losses, due to a decline in sales to Europe. Last year, the company incurred a loss of 6.2 billion euros. According to Reuters, Gazprom's natural gas sales to the European Union fell by 55.6% last year.

This is the first time the company has entered the red zone since Vladimir Putin appointed his ally Alexei Miller to head the state-owned company in 2001.