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Russian gas exports slump by a third in blow to Putin

·2-min read
Putin Russian gas exports Gazprom Kremlin sanctions Ukraine war
Putin Russian gas exports Gazprom Kremlin sanctions Ukraine war

Production has slumped at Russia’s state gas giant Gazprom as it struggles to replace European buyers.

The company said its output so far this year had fallen by 41.7 billion cubic metres (bcm) to 274.8bcm, which was 13.2pc less than the same period last year.

Its exports to countries outside of the former Soviet Union fell by 44.6bcm, or 36pc, over the period.

Russia has been accused of restricting gas supplies to Europe as it weaponises energy as part of its war against Ukraine.

It has cut flows through the Nord Stream 1 pipeline to Germany to 20pc, blaming missing equipment due to sanctions.

Gazprom has talked up its growing exports to China via the Power of Siberia pipeline, which sends gas to China from fields in Russia’s east.

However, exports to China are currently relatively small compared to Russia’s normal exports to Europe.

About 15bcm is expected to be sent to China this year compared to about 200bcm sent annually to Europe before the war, though Chinese exports are expected to ramp up in coming years.

Fields that supply Europe are not currently connected to China, meaning supplies not sent to Europe cannot easily be diverted elsewhere, said Tom Marzec-Manser, head of gas analytics at market specialists ICIS.

If it cannot sell the gas, Russia may have to shut down fields, which may affect future production.

Production in the first half of August was 36pc lower than during the same two weeks last year according to figures from ICIS.

Output since June has also been lower than in 2020, when demand fell due to the pandemic, noted Mr Marzec-Manser.

The slump in gas production comes after the International Energy Agency last week warned that Western sanctions against Russia were having only a “limited impact” on Russia’s oil production.

The IEA said demand had increased in India, China and Turkey even as exports to Europe and the US dropped, blunting the financial impact of sanctions on the Kremlin.

Russia's oil production in July was less than 3pc below pre-war levels.

The fall in Russia’s gas exports has pushed gas prices in Europe and the UK to record levels, triggering a major cost of living crisis and soaring inflation.

This has also dented the impact on Russia’s coffers, as higher prices make up for lost volumes.

In a stark warning yesterday, Gazprom claimed gas prices in Europe this winter could climb above $4,000 per 1,000 cubic metres, which would equate to about €372 per megawatt hour – about 40pc higher than current high prices.