Russia's Gazprom had record high revenues even before gas prices flared over Ukraine

The producer benefited from a surge in gas prices as Europe, its largest export market, faced a severe energy deficit due to post-Covid recovery allied to stockpiles at multi-year lows.

Russia’s gas giant Gazprom reported its highest-ever annual income for 2021, well before prices soared in recent months over the war in Ukraine.       

The producer benefited from a surge in gas prices as Europe, its largest export market, faced a severe energy deficit due to post-Covid recovery allied to stockpiles at multi-year lows. While Gazprom met its delivery obligations, gas flows to the continent were capped as it prioritised re-stocking domestic inventories. 

The market may look past last year’s records as current gas flows are in the limelight amid Russia’s tensions with the West over its invasion of Ukraine. Last month President Vladimir Putin demanded gas should be paid for in roubles — via a complicated mechanism involving setting up two linked bank accounts to handle the foreign exchange transaction.

Earlier this week, Gazprom halted deliveries to Poland and Bulgaria and will keep the flows turned off until the two countries agree to Moscow’s demand to pay for the fuel in roubles. Russia will halt gas supplies to other buyers who don’t pay in roubles as payments come due, in line with the presidential decree.  

Net income rose to almost 2.1 trillion roubles in 2021 compared with 135bn roubles the previous year, Gazprom reported. Gas prices fell on Thursday as traders reassessed the risk that cut-offs would extend across Europe. There could still be room for compromise, though it may be harder now for President Putin to claim it as a win.

The EU tried to draw a line under its disorderly response to Russia’s threat to turn off the gas, telling companies they risk breaching sanctions if they open bank accounts in rubles.

European companies from Italy to Hungary have been quietly taking steps to prepare to comply with President Putin’s decree that gas must be paid for in local currency. While the EU rejected Moscow’s demands, its own guidelines last week appeared to suggest some kind of compromise was possible. 

Poland, outraged by the potential for other countries to exploit loopholes after its own gas was switched off this week, led a group of countries at a closed-door meeting that called for more clarity in the EU’s approach.  The Commission responded on Thursday that companies opening accounts in roubles — a key part of the new Russian rules — will be in breach of sanctions. 

Bloomberg