08-02-2024 | 02:52 PM

#3579

Excargodog

Perennial Reserve

Joined: Jan 2018

Posts: 14,084

Likes: 184

Quote:

Originally Posted by CLazarus

No paywall for this article if anyone wants more than just the excerpt.

https://foreignpolicy.com/2024/05/15...-europe-china/

Gazprom's Declining Fortunes Spell Trouble for Moscow - 15 May 24

"Gazprom’s woes are very likely setting off alarm bells in Moscow: With no good options for the company to revive flagging gas sales, its losses could weigh on Russia’s ability to finance the war in Ukraine. This is especially ironic given the fact that EU sanctions do not target Russian gas exports; the damage to the Kremlin and its war effort is entirely self-inflicted.

The most immediate impact of Gazprom’s losses will be on Russian government revenues, a crucial metric to gauge Moscow’s ability to sustain its war against Ukraine. Poring over Gazprom’s latest financials paints a striking picture. Excluding dividends, Gazprom transferred at least $40 billion into Russian state coffers in 2022, either to the general government budget or the National Welfare Fund (NWF), Moscow’s sovereign wealth fund.

This is no small feat. Until last year, Gazprom alone provided about 10 percent of Russian federal budget revenues through customs and excise duties as well as profit taxes. (Oil receipts usually account for an additional 30 percent of budget revenues.) This flood of money now looks like distant history. In 2023, the company’s contribution to state coffers through customs and excise duties was slashed by four-fifths, and like many money-losing firms, it is due a tax refund from the Russian treasury.

For Moscow, this is bad news on several fronts. Because of rising military expenses, the country’s fiscal balance swung into deficit when Moscow invaded Ukraine. To help plug the gap, the Kremlin ordered Gazprom to pay a $500 million monthly levy to the state until 2025. Now that the company is posting losses, it is unclear how it will be able to afford this transfer. In addition, Gazprom’s contribution to the NWF will probably have to shrink. For the Kremlin, this could not come at a worst time: The NWF’s liquid holdings have already dropped by nearly $60 billion, around half of its prewar total, as Moscow drains its rainy-day fund to finance the war. Finally, Gazprom’s woes could prompt the firm to shrink its planned investments in gas fields and pipelines—a decision that would, in turn, hit Russian GDP growth.

As if this was not enough, a closer look at Gazprom’s newly released financials suggests that the worst may be yet to come, with three telltale signs that 2024 could be even more difficult than 2023.

First, Gazprom’s accounts receivable—a measure of money due to be paid by customers—are in free fall, suggesting that the firm’s revenue inflow is drying up. Second, accounts payable shot up by around 50 percent in 2023, hinting that Gazprom is struggling to pay its own bills to various suppliers. Finally, short-term borrowing nearly doubled last year as Russian state-owned banks were enlisted to support the former gas giant."

With its two major gas pipelines destroyed, Gazprom was destined to be screwed.

https://maritime-executive.com/artic...cades#:~:text=(Gazprom's%20subsea%20Nord%20Stream%20export,some% 20countries%20continue%20to%20buy.

https://www.statista.com/statistics/...prom-globally/

They do hope to offset their decreased sales of gas through sales to Iran however:

https://pgjonline.com/news/2024/july...y-oil-minister

But overall, petrochemical sales to India, China, and others are largely offsetting the loss of revenue from former sales to Europe more recently:

Quote:

Russia's July oil and gas revenue to jump 50% to $14 bln, Reuters calculations show

July 18, 2024 at 02:27 pm IST
ShareMOSCOW, July 18 (Reuters) - Russia's oil and gas revenue in July is set to rise by 50% year on year to almost $14 billion thanks to stronger oil prices and a weaker rouble, Reuters calculations showed on Thursday.

Oil and gas revenue has been the most important source of cash for the Kremlin, accounting for about a third to a half of total federal budget proceeds over the past decade.

Preliminary estimates project Russia's July oil and gas revenue at 1.22 trillion roubles ($13.93 billion), up from 747 billion roubles in June and 811 billion roubles in July 2023.

Proceeds for the January to July period are projected to rise by 65% year on year to 6.9 trillion roubles.

Russia's Finance Ministry is due to publish the July data on Aug. 5.

July's payments will also benefit from Russia's profit-based tax, typically paid once a quarter, reaping about 500 billion roubles, according to Reuters calculations.

The coffers have been boosted by a rise in the average price of Russia's Urals oil grade to 6,405 roubles ($73.12) a metric ton in the second quarter, up from 6,139 roubles in the previous quarter.

The budget is also set to benefit from lower subsidies to refineries under the so-called damper mechanism and excise tax. Those payments from the budget are set to decline in July by about 29 billion roubles from June.

For 2024 as a whole, the government budgeted for federal revenue of 10.7 trillion roubles from oil and gas sales, up 21% from 2023, when weaker oil prices and a fall in gas exports reduced the revenue by 24%.

That 2024 target was revised down from initial plans for 11.5 trillion roubles.

Russia has heavily increased defence and security spending since launching what it calls its special military operation in Ukraine in February 2022, leading to two consecutive annual deficits exceeding 3 trillion roubles, about 2% of GDP. (Reporting by Reuters Editing by David Goodman)

Although there is no question that the sanctions have had an effect on Russia it appears to be far less than our State Department said it would be. The International money fund is projecting them to have a 6.9% inflation rate this year with a GDP growth year over year of 3.2%.

https://www.imf.org/en/Countries/RUS

By comparison, the IMF is projecting us to have an inflation rate of 2.9% and a gdp growth of 2.7%

https://www.imf.org/en/Countries/USA

So gazprom's loss of sales to the EU doesn't appear to be greatly affecting the ability of Russia to wage war at this time. I think you need to look at a broader spectrum of sources to get a grip on just what the situation is in Ukraine, realizing that takes real effort since both sides are lying through their teeth, propaganda being an accepted and necessary 'front' in any war.

This Brookings article might give you an objective place to start:

https://www.brookings.edu/articles/r...f-imagination/

An excerpt:

Quote:

Russia’s military is adapting, to good effect. Its economy is transitioning to wartime production. China, India, and Brazil remain inclined to engage with Russia where the getting is good: imports of oil and exports of cars, machines, and other items used in manufacturing and engineering. Many others also remain unmoved by entreaties to isolate Russia, whether because they are unconvinced by assertions that Putin’s security claims are wholly illegitimate, or because they can’t reconcile objections to Russia’s inhumane prosecution of its war against Ukraine with U.S. support for Israel’s inhumane prosecution of its war against Hamas, or for other reasons entirely.

On the other side of the ledger, Ukraine is struggling to mobilize and field forces, and it is clear that it cannot long sustain a meaningful military effort without large and consistent inputs from its friends. And if the last cycle of wrangling in the U.S. Congress suggests anything, it is that the United States might—but also might not—long be that kind of friend. There is movement toward securing additional funds for Ukraine by capitalizing on the interest earned on profits from Russia’s frozen central bank assets, but the legal details of this maneuver are many and will take some sorting out. Time does not seem to be on the side of a trans-Atlantic strategy that is set on achieving full reconstitution of Ukrainian territory.

A painful tradeoff

U.S. policymakers thus are rapidly approaching the event horizon at which they will no longer be able to avoid making a painful tradeoff between what they value materially and what they value morally. Materially, staying the current course “as long as it takes” will draw down state coffers and weapons stocks, and leech the political capital needed to get the spending done. Providing support beyond that— support which might make a Ukrainian battlefield victory possible—would require not only an even larger commitment of fiscal, material, and political capital but also a high tolerance for risking a local and possibly a global catastrophe. It is one thing to believe in the abstract that Putin won’t use nuclear weapons; it’s another to put that belief to the test.

Morally, although the current narrative insists that the cost of pursuing or accepting outcomes short of a full Russian defeat is a Europe ripe for the taking, the actual cost is something both less and more: it is the price of severing attachment to the idea that war termination should be just. It is disappointing the conviction that the wronged should be made whole, and the wrongdoer made small.

Arguments connecting Russian defeat with a stable Europe, on the one hand, and negotiated settlements with dire, imagined future events, on the other, are attempts to drive policymakers toward a strategy that delivers moral satisfaction. The desire for that satisfaction is understandable—but a strategy designed to deliver it should not be confused with a strategy designed to end the war, to deliver European security, or to reduce the likelihood of World War III.

How the war ends will affect, but not determine, the depth and duration of stability in Europe thereafter. The search for an improbable perfect—a victory that returns all Ukrainian territory and ensures Russia will not attack it ever again— therefore should not be allowed to be the enemy of an achievable good. And an achievable, good outcome is one in which the war ends with a sovereign Ukrainian state led by an autonomous Ukrainian government.