Soaring Prices and 'Gise Deungdeung' Russia... Profits Surge Despite Europe's Gas Export Halt

Fossil Fuel Export Value Doubles Year-on-Year
"Maintaining Current Situation Will Be Difficult," Forecast

Russian state-owned gas company Gazprom.
Photo by Yonhap News

[Asia Economy Reporter Na Ye-eun] Although Russia has stopped gas exports to six countries since its invasion of Ukraine, it is reported that Russia's revenue has actually increased due to the surge in gas prices.

CNN reported on the 1st (local time) that Russia's natural gas exports to Europe have decreased by more than a quarter since January, but soaring prices are boosting Russia's profits.

The day before, Russia's state-owned gas company Gazprom announced that it would suspend contracts with Danish energy company Ørsted and multinational energy company Shell Energy Europe, which refused to pay for gas in Russia's currency, the ruble.

As a result, gas imports from Russia were halted in Denmark and Germany, which have contracts with the two companies. Therefore, the number of countries where Russia has suspended contract fulfillment has increased to six, including Poland, Bulgaria, Finland, and the Netherlands, in addition to the two aforementioned countries.

Gazprom stated in a report that from January to last month, Russia's natural gas exports (excluding the Commonwealth of Independent States (CIS)) decreased by 28% compared to the same period last year. This is due to Western sanctions led by the United States and the European Union (EU), and it is known that gas exports have decreased by at least 20 billion cubic meters since the outbreak of the Ukraine invasion.

However, according to a report by the Clean Energy Research Center (CREA), the EU's imports of Russian fossil fuels during the two months following Russia's invasion of Ukraine amounted to $47 billion (about 58.7 trillion KRW), nearly double the amount during the same period last year.

European Union (EU) flag / Photo by Reuters Yonhap News

The surge in Russia's revenue is due to the sharp rise in energy prices. James Huckstep, a gas analyst at credit rating agency Standard & Poor's (S&P), told CNN Business in an interview that the average gas price this year rose to 96 euros (about 129,000 KRW) per megawatt-hour (MWh), adding, "Unless Russia further reduces exports, profits are unlikely to decrease significantly."

Another reason is that gas exports did not decrease as much as expected. In March, Russia announced that it would stop gas supply to Europe if payment was not made in rubles. However, it later provided a workaround.

If gas buyers open accounts at Gazprom's subsidiary Gazprombank and deposit dollars or euros, Gazprombank converts the funds into rubles and transfers them to Gazprom.

EU officials argue that this method may violate Western sanctions against Russia, but major European gas companies such as Italy's largest energy company Eni have adopted this payment method.

However, it is expected that Russia's gas revenue will find it difficult to maintain the current situation. The EU is moving quickly to further reduce its dependence on Russian gas.

The EU has decided to reduce Russian gas consumption by 66% by the end of the year by increasing imports of liquefied natural gas (LNG). EU member states have also agreed to fill their gas storage facilities to at least 80% by November to mitigate the impact of potential gas supply disruptions during winter.

CNN forecasted, "Since Russian gas is mainly exported through pipelines, if Europe further reduces imports of Russian gas, it will be difficult for Russia to find alternative customers, which is expected to affect Russia's revenue as well."

This content was produced with the assistance of AI translation services.