Published On: Wed, Apr 29th, 2015

Gazprom Profit Affected By Ruble And Ukraine Crisis


Gazprom has faced tough market conditions that have been out of its control.

It’s not news that Russia is facing huge economic impact because of the value of their own currency and actions in the Ukraine, but now the impact has started affecting major companies based in their country. Gas and oil giant Gazprom just released information about last year’s profit and it is less than they expected it to be.

As Gazprom was one of the most profitable companies in the world this news hasn’t come easy for its leaders. Annual net profit reported this Wednesday is about 3 billion dollars, which is a disaster compared to 2013 when it was 21.8 billion dollars.

Even with terrible numbers on the line analysts say this is “better than expected”, referring to it as a situation beyond the company’s control and is the main factor of the poor results.

Besides a drop in their earnings Gazprom also suffered a big loss from higher expenses which rose to 17.7 billion dollars because of a drop in the ruble on foreign exchange markets. In addition, Gazprom also had to write off all the money that Naftogaz owed them after a new western oriented government took charge of Ukraine.

The only good thing that happened to Gazprom last year is that sales to their biggest customer, Europe, rose by 6.4 percent, but only because the price of oil at the beginning of 2014 were higher than in 2013. Even with positive growth financially the volume of gas delivered to Europe actually fell 8 percent. Since prices dropped at the end of the year and they don’t seem to be increasing any time soon even lower numbers are expected further down the line.

This year already seems to be one of the hardest for the company since it was founded. In addition the company awaits investigation by the European Commission that charged Gazprom with abuse of its dominant position in the European markets.

A bad political situation between Russia and the EU might endanger Gazprom’s position on market even more as their EU partners are already looking for an alternative for their gas supply.

If the current situation doesn’t change soon competitors like Novatek and Rosneft might push Gazprom from the table. Rosneft is led by Gazprom’s former executives who are planning to launch a gas arm to Europe, a move that could take Gazprom from its throne.

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