The Russian gas giant and monopolist is doing poorly. Gas production in the country fell by 24%, and if we count only for Gazprom, then by almost a third compared to the pre-war level. Exports to the European far abroad have fallen from 170-180 billion cubic meters in the best years to 12 billion cubic meters in the first six months of this year. Arbitration courts are accumulating multibillion-dollar lawsuits from consumers to whom Gazprom stopped supplying gas in violation of contracts. Budget revenues from gas exports fell by 80%. The company stopped paying dividends.
Thousands of investors who have invested in Gazprom shares and held these securities for many years with the expectation of their growth see that the price of this “wrapper”, which exceeded 360 rubles ($4.90) at the peak of September 2021, has fallen to 166 rubles, which at the current exchange rate does not exceed $1.80. Lost on this and individuals who believed in the "national treasure" and uttered toasts "for us, for you, for gas", and the entire national economy.
Who and how brought a huge company, which employs almost half a million people, to such a state?
Gazprom has built its empire on gas exports without much concern for the domestic market. In all the official "energy strategies" of the Russian government, the export monopolist was supposed to increase its work with foreign buyers and leave other companies to serve domestic consumers.
Gazprom built its empire on gas exports, not caring much about the domestic market
By the way, the priority of export was laid, by the way, back in Soviet times, when, having discovered colossal reserves of natural gas, the USSR went with it to Europe in the second half of the 1960s and offered the West mutually beneficial terms of cooperation: uninterrupted gas supplies in exchange for technology, equipment , consumer goods and much more, which the Soviet state was in dire need of. A strong system of interdependence emerged that could not be shaken even by such political factors as the invasion of Czechoslovakia in 1968 or Afghanistan in 1979. Through gas, Europe became dependent on the USSR, and then on Russia, no less than a gas supplier depended on European buyers. At the beginning of 2019, Russia provided 39.4% of gas imports in the European Union, and the proceeds from these supplies amounted to 13.5% of federal budget revenues.
The temptation to upset this balance and, as they say now, “weaponize” this interdependence, that is, introduce an element of political manipulation and pressure into it, arose with the strengthening of power in Russia in the hands of Vladimir Putin and his Chekist associates. This group was absolutely alien to the principle of win-win, that is, the development of beneficial relationships based on mutual concessions. The ideology of the Kremlin was dominated by the methods of yard punks: “hit first”, “yield even in a small way – you are a loser.” Gas supplies began to gradually turn into an instrument of blackmail.
It began with the modification of contract terms. The price in contracts began to be determined by politics: discounts and additional material assistance from Gazprom to friends, but extra charges for those who, in the opinion of the Kremlin, opposed the Moscow regime. Send threats to cut or stop deliveries to the "recalcitrant".
It cannot be said that Gazprom acted exclusively impudently throughout Putin's time. The Europeans began to suspect something and took action. They banned Gazprom from introducing a clause in contracts prohibiting the resale of gas received from Russia, demanded to cover up fraudulent supply schemes through Gazprom’s subsidiaries associated with corrupt officials in European countries, began to strictly monitor the politicization of gas prices, introduced regulation through the so-called “energy packages."
Gazprom reacted angrily, but quickly and adequately, having fulfilled almost all the requirements of the EU, and went even further, demonstrating its readiness to work on market principles, without politics. In addition to long-term contracts, Gazprom's practice increasingly began to include spot contracts, on extremely flexible terms. The Europeans came to the conclusion (as time has shown, hastily) that it is possible to work with the Russian monopolist in a civilized manner and count on its reliability.
The Europeans came to the conclusion that one can work with Gazprom in a civilized manner and count on its reliability
It wasn't there. In 2021, in preparation for a large-scale invasion of a neighboring country, Putin ordered Gazprom to use supplies to Europe as a political tool under the slogan “we will freeze you and bring you to an economic collapse if you insist on supporting Ukraine and do not lift sanctions against Russia.” ". To begin with, the Russian president demanded payment for gas in rubles – that is, he demonstrated an open violation of contractual terms, and when some buyers refused to pretend that they were paying in rubles, he began to turn off their gas. Then Gazprom stopped pumping gas into its underground storage facilities in Europe, stopped selling gas on electronic trading platforms, and sharply reduced pumping through export routes.
Putin ordered Gazprom to use supplies to Europe as a political tool
The venture failed. First, Europe has shown miracles of resilience and resilience, albeit at a high cost. She survived the winter, and eventually established alternative ways to get gas. And secondly, Putin’s calculations that the European market could be replaced by the Chinese turned out to be an illusion: the Chinese do not have such a need for Russian gas as the Europeans had, and the transport infrastructure for the required capacity to China can be built no earlier than years after 12–15.
Now the head of the company, Alexei Miller, has issued new ultimatums. He threatens to completely stop pumping gas to Europe through Ukrainian territory if Kyiv does not give up its demands for compensation for the violation by the Russian side of the contractual terms on transit. Miller does not want to fulfill his obligations under the agreement with the Ukrainians, just as he does not want to pay the due fine for this. There is still the same boorish psychology of the "St. Petersburg gopnik".
Gazprom, which was not hindered by any sanctions and which had every chance to continue operating as a normal commercial company in the European energy market, actually committed suicide as an exporter. The order to make hara-kiri "national treasure" received from the Kremlin.
