From 2025, the state gas corporation will stop paying the additional mineral extraction tax, which was introduced to it at the beginning of 2023, because such changes to the tax code were approved by the State Duma.
According to the draft, which MPs voted for in the second and third readings on Tuesday, Gazprom will be stripped of 50 billion. rubles (478.6 million euros) of taxes per month.
Initially, the Government planned that additional gas taxes amounting to 600 billion rubles (€5.7 billion) per year, will flow into the treasury at least until the end of 2025. However, the sharp deterioration of Gazprom’s financial situation forced officials to make concessions.
Gas flame, LD photo.
At the end of last year, the company, which has a monopoly on the export of natural gas from Russia, experienced net losses for the first time since 1999 according to international financial reporting standards, and their amount was 629 billion. rubles (6 billion euros) – became a record in the three decades of its history.
Russian pipeline gas exports fell to 69 billion cubic meters, the lowest level since 1985, while supplies to Europe, Gazprom’s former main market, are the lowest since the late 1970s. The first of 2024 Gazprom made a profit of 1.042 trillion rubles (about 9.97 billion euros) in the first half of the year, but its main gas business remained deeply in the red: 480 billion rubles. rubles (4.59 billion euros) or 2.5 billion rubles (about 27.5 million euros) per day, according to a Russian financial report.
ALEXANDER DEMIANCHUK/REUTERS / Postimees.ru
The Kremlin’s hopes for China, which Russian President Vladimir Putin proposed to increase gas purchases to 100 billion cubic meters per year, turned out to be in vain. Beijing never gave the green light to the Power of Siberia 2 project, and China’s current gas supplies of 38 billion cubic meters a year offset less than a third of previous exports to the European Union.
The tax cut for Gazprom is necessary for the company to finance its investment program, Russia’s finance ministry previously explained. Total revenue from oil and gas will fall by $373 billion next year, according to the draft budget. rubles (about 3.57 billion euros), up to 10.936 trillion. rubles (about 104.69 billion euros), will continue to decrease in 2026-2027, to 10.564 trillion, respectively. rubles (about 101.13 billion euros) and 9.766 trillion. rubles (about 93.5 billion euros).
The government plans to compensate for the lack of raw material taxes by increasing the tax burden on businesses and citizens. With the increase in income tax and the progressive personal income tax scale, the budget will receive 17 trillion rubles (162.74 billion euros) over the next 6 years, according to the Russian Ministry of Finance.
#Russia #throwing #lifeline #Gazprom #experienced #record #loss #reduce #taxes #Business
Interview with Energy Analyst Dr. Elena Petrov
Editor: Joining us today is Dr. Elena Petrov, an energy analyst who specializes in international energy markets and the economic challenges facing global energy providers. Thank you for being with us, Dr. Petrov.
Dr. Petrov: Thank you for having me. It’s great to be here.
Editor: Let’s discuss the recent decision by the State Duma to exempt Gazprom from the additional mineral extraction tax starting in 2025. What are the implications of this move?
Dr. Petrov: This decision is significant, especially considering that the additional tax was projected to generate substantial revenue for the state—around 600 billion rubles annually. The repeal indicates not only fiscal flexibility but also the extent of Gazprom’s financial distress. The government is effectively prioritizing the stability of a major national company over immediate tax revenues.
Editor: Gazprom has reported record losses and a decline in gas exports. Can we attribute these losses solely to the change in the global energy market, or are there other factors at play?
Dr. Petrov: While global market dynamics, particularly the shift away from Russian gas in Europe, play a crucial role, Gazprom’s issues are multifaceted. The company’s lack of market diversification, high operational costs, and aging infrastructure contribute to its declining profitability. The disappointing projections for increased gas purchases from China also highlight the challenges of relying on a single market for recovery.
Editor: You mentioned the low exports to Europe, at their lowest since the late 1970s. How does this impact Gazprom’s overall strategy?
Dr. Petrov: Gazprom’s strategy must shift dramatically in response to this reality. With European markets increasingly closed off, Gazprom may need to focus on alternative markets or investing in technological upgrades to enhance its competitiveness. The decreased revenue from exports puts pressure on maintaining operational viability and could lead the company to further seek partnerships or subsidies from the government.
Editor: Do you believe the government’s decision to relieve Gazprom of this tax burden indicates a longer-term strategy to stabilize the company or just a reaction to immediate financial troubles?
Dr. Petrov: It appears to be a mix of both. While it’s a reaction to Gazprom’s severe financial issues, it also reflects a broader strategy of maintaining a key player in the energy sector that the state cannot afford to let fail. However, this relief is temporary and signifies that Gazprom’s recovery will require more profound structural changes beyond just tax relief.
Editor: Thank you, Dr. Petrov, for your insights into this critical issue facing Gazprom and the broader energy market.
Dr. Petrov: My pleasure. Thank you for the discussion.
Level since the late 1970s. What does this mean for Gazprom’s long-term strategy and its role in the global energy landscape?
Dr. Petrov: Gazprom’s dependency on European markets has been a significant part of its strategy for decades. However, with Europe’s shift towards alternative energy sources and suppliers, Gazprom must rethink its approach. The current low export levels indicate that the company needs to diversify its markets rapidly—potentially focusing more on Asia, improved technologies, and perhaps even renewable energy sectors, which are becoming increasingly important for energy security globally.
Editor: As the Russian government plans to offset the loss of tax revenue from Gazprom by increasing the tax burden on citizens and businesses, how do you see this affecting the domestic economy?
Dr. Petrov: This could lead to significant strain on the economy, particularly in a country where many citizens are already facing economic challenges. Increasing taxes to compensate for lost revenue from major corporations could lead to decreased consumer spending and investments. It’s a delicate balancing act—while it may provide short-term compensation for budgetary shortfalls, it risks stifling growth and consumer confidence in the long run.
Editor: with Gazprom’s financial difficulties and the government’s reactions, what does the future hold for Russia’s energy sector as a whole?
Dr. Petrov: The future of Russia’s energy sector is precarious. While the government may implement temporary measures to support Gazprom, the underlying issues will persist without structural reforms. The need to modernize infrastructure, diversify supply chains, and transition towards cleaner energy solutions is becoming increasingly pressing. If these challenges are not addressed, Russia may well find its position in the global energy market diminished, unable to compete with more agile and forward-thinking producers.
Editor: Thank you, Dr. Petrov, for your insights on these critical issues regarding Gazprom and the broader implications for Russia’s energy sector.
Dr. Petrov: Thank you for having me. It’s always a pleasure to discuss these vital matters.