The crown jewel of Russian energy is losing its shine.
Gazprom, the world’s biggest gas producer, saw its net profit fall 70% to 189 billion rubles ($3.3 billion) in 2014. The weak ruble was a big reason.
The profit does not include Gazprom’s subsidiaries, such as its oil-producing arm Gazprom Neft, which reported its own 2014 profit falling 32% earlier this month.
The state-run energy giant has been hit by Russia’s conflict with Ukraine. Its gas supplies to Ukraine have been at the center of the conflict. Moscow has repeatedly threatened to cut off Ukraine’s supply.
Europe has in turn accused Gazprom of using its dominant position to manipulate prices and hinder the free flow of gas across the continent.
About a third of Europe’s natural gas comes from Russia and 15% flows directly through Ukraine.
Gazprom’s falling profits are bad news for investors, the largest of which is the Russian government, who are likely to see their previously generous dividends slashed.
According to a Bloomberg report, Moscow sees Gazprom’s 2015 dollar revenues in Europe sinking to the lowest in a decade.
Gazprom’s activities alone made up around 8% of Russia’s GDP in 2013 — around half of Russia’s government revenues come from oil and gas exports.
Most Russian exporters are hurting due to the collapsing Russian economy and low energy prices. The ruble has fallen 40% in the last six months, inflating the cost of foreign debts.
