Gazprom’s net prof­its down sev­en­fold in ’14 on con­flict in Ukraine

The China Post - - WORLD BUSINESS -

Rus­sia’s gas gi­ant Gazprom on Wed­nes­day re­ported net prof­its in 2014 plunged sev­en­fold over the pre­vi­ous year, weighed down by fall­out from the Ukraine cri­sis and shrink­ing value of the ru­ble.

The com­pany — which was the most prof­itable in the world just a few years ago — re­ported 159 bil­lion rubles in net prof­its last year (US$3 bil­lion, 2.8 bil­lion eu­ros), ac­cord­ing to Gazprom’s an­nual re­port pub­lished Wed­nes­day.

That com­pared to 1.14 tril­lion rubles (US$21.8 bil­lion, 20 bil­lion eu­ros at the cur­rent ex­change rate) in 2013.

Gazprom ex­plained the 86 per­cent drop on two main fac­tors: the de­creased value of the ru­ble, and its fric­tions with Ukrainian gas op­er­a­tor Naftogaz.

The com­pany said its ex­penses went up by 926 bil­lion rubles (US$17.7 bil­lion) be­cause of an “in­crease in for­eign ex­change dif­fer­ences ex­penses due to ap­pre­ci­a­tion of U.S. dollar and Euro against Ru­ble.”

It was also forced to write off a whop­ping 34 bil­lion rubles (US$650 mil­lion) aris­ing from its con­flict with Naftogaz, which spi­ralled af­ter the ouster of Ukraine’s Krem­lin-backed for­mer pres­i­dent Vik­tor Yanukovych.

Moscow sharply hiked gas prices for Ukraine af­ter the ar­rival of new pro-West­ern au­thor­i­ties to power in Kiev fol­low­ing mass demon­stra­tions. That in­crease sparked pro- tests from Ukraine, which re­fused to pay debts de­manded by Gazprom.

As a re­sult, Rus­sia cut gas de­liv­er­ies to Ukraine last June, and did not re­sume them un­til the end of the year.

Sales to Europe — Gazprom’s main cus­tomer — grew by four per­cent, how­ever, lift­ing over­all sales by 6.4 per­cent to 5.59 tril­lion rubles (US$106.3 bil­lion).

Gazprom is likely to face a tough 2015, with the price of gas drop­ping sig­nif­i­cantly in its ex­ist­ing con­tracts due to the fall of global oil prices.

The com­pany also faces an in­ves­ti­ga­tion by the Euro­pean Com­mis­sion, which last week charged it with abus­ing its dom­i­nant mar­ket po­si­tion in Europe.

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