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Hitting rock bottom: Russians to face a sharp increase in tariffs as the country's gas exports collapse to USSR-era levels

Kseniya KapustynskaNews
Gazprom's performance has collapsed
Gazprom's performance has collapsed

In its attempts to "freeze" Europe, leaving the EU countries without gas, Russia has struck its own monopoly, Gazprom. As a result, by the end of 2023, Gazprom sold only about 69 billion cubic meters of gas for export, which is a minimum since 1985. And having actually rolled back 40 years in time, the Russian gas giant plans to raise gas tariffs for Russians themselves.

The Russian Federation has not officially disclosed data on gas exports. The calculations were made by Reuters analysts. Gazprom has not published its own statistics since the beginning of 2023, and the company also does not respond to media requests.

The agency estimated that in 2023, gas supplies from Russia to the EU decreased by 55.6% to 28.3 billion cubic meters in 2023. This is the level of the second half of the 1970s, The Moscow Times notes. Across all export destinations, Russia sold one-third less than in 2022, which was already the worst year for Gazprom in its history.

"This is what hitting rock bottom looks like. This year (2023 - Ed.) we will see a rapid downgrade of exports and production. Then we will gradually recover. The bad news is that this recovering, the additional growth, will be slow," Alexey Belogoryev, Director of Research and Development at the Institute of Energy and Finance, said at a gas forum in Moscow.

For the year that ended June 30, 2023, Gazprom has already received a trillion rubles in net losses and was forced to spend two-thirds of its cash reserves. In the first half of the year, Gazprom's production fell by a quarter compared to pre-war levels.

Against the backdrop of Gazprom's disastrous performance, the Russian Federation decided to charge domestic gas tariffs. As a result, gas tariffs for the Russian population are expected to be increased by 11.2% starting in July 2024, and by another 8.2% starting in July 2025.

As a result, gas prices will rise by 20% in two years, and by 34% since the beginning of the war: in 2022, tariffs have already been indexed twice: by 3% in July and by 8.5% in December. This price increase is a record for Russians. The last sharp increase in gas tariffs occurred in 2013, which was by 15% per year.

In the future, Russia plans to count on China to save the situation with gas exports. The Kremlin wants to increase gas supplies to China 5 times, to 100 billion cubic meters per year by 2030. However, experts predict that China's demand for imported gas will increase by only 80 billion cubic meters, and all this volume has already been contracted, including gas from Turkmenistan and liquefied natural gas.

In addition, the contract for the transit of Russian gas through Ukraine will expire in 2024, which means that supplies to Europe may continue to decline. It will be unrealistic to restore the lost export volumes in the next 10 years, Andrei Klepach, chief economist at the VEB, says, "Even taking into account existing and planned contracts with China, we will not be able to compensate for the loss of almost 100 billion cubic meters."

As reported, analysts believe that Russia has lost a significant share of the global gas market for a long time. The main reason for this is that the Kremlin has cut off supplies to many EU countries in order to achieve concessions regarding the war against Ukraine.

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