Russia’s Gazprom lifts European sales after cut to Ukraine supply

RUSSIA’S state-backed gas company increased its sales to Europe by more than a third in the first half of the year, after cutting exports to Ukraine amid ongoing tensions with its nearest neighbour.

Gazprom, Europe’s largest supplier of gas, said that it boosted European gas flows by 36pc to 109.4bn cubic metres. However, the company’s European revenues rose by a smaller amount, climbing 20pc to 1.13 trillion roubles (£13.2bn) as the low price of oil and gas dragged down turnover.

The jump in gas flows to Europe – including Germany, the Netherlands and the UK – more than offset the 22pc fall in the company’s exports to former Soviet Union countries, helping bolster Gazprom’s income above market expectations.

The gas behemoth’s half-year profits fell by a tenth, to 780.8bn roubles before tax.

Gazprom cut off gas supplies to Ukraine as relations soured between Moscow and Kiev late last year. The two countries have been locked in a bitter payment dispute over Russian gas prices and Ukraine’s gas transit fees against an increasingly tense political backdrop.

Gazprom plans to circumvent its neighbour by building a second major gas pipeline alongside the existing Nord Stream line to flow its gas via the Baltic Sea to Germany rather than negotiate terms with Kiev.

Critics accuse Russia of using the new route to cut off a key source of national revenue for Ukraine, weakening its economy as well as its political leverage, but Gazprom argues that it is an important step to securing reliable gas deliveries to Europe.

Earlier this year Gazprom boss Alexei Miller predicted that Europe would rely on Russia for record imports of natural gas as domestic production plunges. Gazprom was responsible for almost a third of European gas demand last year, and Mr Miller said the gas giant would export even more to European buyers in 2016 as North Sea production dwindles.

Gazprom’s largest European customers are in Germany and the Netherlands, countries closely connected to the UK gas grid through two major pipelines.

“We expect that 2016 will be a record year for us,” said Mr Miller at the St Petersburg International Economic Forum.

“Gazprom is aware of the alternative gas sources and other projects, but we are certain that Russian gas will be in demand in Europe for a long time,” he added.