Gazprom faces decade-long journey trying to recover lost revenues from Ukraine war after years of European trade ‘flushed down the toilet’

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While Europe struggles to put a major dent in the Russian economy following the country’s invasion of Ukraine two years ago, state-owned Gazprom has proved a major corporate casualty after the continent began weaning itself off the group’s natural gas.

According to an internal report commissioned by the gas giant and published last November, Gazprom may not recover to pre-war export revenue until 2035 due to sanctions on Russian oil and gas exports.

The document, reported by the Financial Times, brings into focus the monumental battle ahead for Gazprom as it digests multibillion-dollar losses and looks to other markets to ship its gas.

Gazprom slumped to its first loss in 20 years in 2023, hemorrhaging 629 billion roubles ($7.1 billion) after being locked out of its crucial Western European export market, a massive swing from its net profit of 1.2 trillion roubles ($12.9 billion) in 2022.

Last year, Gazprom exported just 28.3 billion cubic meters of natural gas to Europe, according to Reuters analysis, a 55.6% annual decline.

By 2035, exports to Europe will average around 50-75 billion cubic meters per year, a third of pre-war export levels, according to the report.

“The main consequences of sanctions for Gazprom and the energy industry are the contraction of export volumes, which will be restored to their 2020 level no earlier than in 2035,” the FT reported the authors writing.

“Because Gazprom, which doesn’t have its own proven technology for producing LNG at large capacity, is the only company exporting gas via pipeline and those volumes are decreasing, Gazprom’s role in the gas industry is accordingly expected to decrease,” the authors wrote.

Gazprom hopes to offset its lost European trade with other markets, notably China. The country is in talks with Russia to develop a Power of Siberia-2 pipeline, but negotiations have stalled.

Internally, some Gazprom officials have grumbled at the loss of European business, viewing it as devastating for the group’s long-term prospects and a waste of years of hard work.

“The work of hundreds of people, who for decades built the exporting system, now has been flushed down the toilet,” a former Gazprom manager told Reuters last year, speaking anonymously.

Russia’s economy chugs along

While Gazprom continues to reel from Russian President Vladimir Putin’s invasion, the Russian economy is on comparably healthy footing.

Despite dealing with inflation exceeding 7%, output continues to grow and fund Putin’s war machine. GDP is expected to expand at 3.2% this year, according to the IMF. That compares with 0.8% growth in the Eurozone and 2.7% in the U.S.

Meanwhile, major European economies, particularly Germany, are struggling with the new reality of more expensive oil and gas imports.

The chief of German renewables group RWE said Germany would probably never fully recover from its old reliance on Russian energy.“You’re going to see a bit of recovery, but I think we’re going to see a significant structural demand destruction in the energy-intensive industries,” RWE boss Markus Krebber told the FT.

This story was originally featured on Fortune.com