The Russian gas company Gazprom announced last night a record profit for the first half of 2022, against the background of the surge in gas prices in Europe and despite the international sanctions on Russia. The company earned about 41.6 million euros in the first six months of the year. In May, the company announced, for the first time since 1998, that due to the market situation it would not distribute a dividend, but last night (Tuesday) it went back and announced that it would distribute an interim dividend (a procedure it had not taken so far) in the amount of 20 billion euros. Half of it will flow to the Russian government, which owns more than 50% of the company.
According to commentators, this shows, on the one hand, that the Russian government is in desperate need of cash to try and close a projected budget deficit of close to 30 billion euros in the coming year, which results, among other things, from dealing with international sanctions. On the other hand, the move also shows that Europe still provides tens of billions of euros each to the Russian government, which helps it continue the war in Ukraine.
Europe depends on Russian gas
European media reported that the profit in the first half of 2022 is the largest the company has ever recorded. In all of 2021, for comparison, the Russian company earned about 27.5 billion euros. Gazprom’s board of directors approved the move yesterday, which still requires formal approval at a meeting to be held on September 30.
Europe, and especially Germany and Italy, worked to exclude Gazprom from the international sanctions, due to their dependence on Russian gas. The company “cut off the gas” to several “unfriendly” European countries as it defined, and reduced the flow of gas to Europe to only 20% of the capacity of the “Nord Stream 1” pipeline. This resulted in a meteoric rise in European and British gas prices, and what appears to be an unfolding crisis in the European energy market. The European Union is expected to convene an emergency meeting of energy ministers to review the implementation of a comprehensive reform in the field. Germany and other countries are preparing for gas rationing for industry and public buildings this coming winter, and are already trying to reduce consumption by dozens of percent by adopting various measures. The price increases, as mentioned, resulted in record profits despite the reduction in the amount of exports to Europe.
The vice president of Gazprom told the Russian media yesterday that the decision to distribute a dividend of 50% of the profits is due to the “excellent performance of the company and great liquidity in its balance sheets”. It is not clear whether foreign investors who own the company’s shares will also be able to receive the dividend. Selling or buying securities on the Moscow Stock Exchange was forbidden to foreign investors at the beginning of the war.
Analysts said that the fact that the Russian government is currently “milking” Gazprom will not allow the company to invest in the near future in the construction of gas pipelines for transport to China and the East, which may compensate for the loss of business with Europe. They estimated the costs of such pipelines, or LNG plants that would enable the gas to be sent by ship, at 100 to 150 billion euros, according to the German economic newspaper “Handelsblatt”. In the meantime, the company continues to signal to Europe that its gas supply is not guaranteed in the winter, and today closed the transmission of gas in “Nord Stream 1” completely for several days. The reason for the move is “unplanned infrastructure works”. Energy analysts are waiting for Saturday, the date when the flow of gas from Russia to Europe is supposed to resume. It also announced that it will stop the transfer of gas to the French company ENGIE immediately, due to “disagreements regarding the existing contracts between the parties”.