Gazprom is looking at every avenue to cut costs, including its portfolio of luxury hotels, after the group fell to its second successive year of losses as Russia’s war with Ukraine continues to hammer energy exports.
The group’s net losses on Russian Accounting Standards (RAS) hit 1.076 trillion roubles ($12.89 billion) last year, largely attributable to a decline in the market value of shares in Gazprom’s oil division, Gazprom Neft, according to Interfax, Reuters reported.
The same RAS figure in 2023, which doesn’t include the results of subsidiaries, gave Gazprom a profit of 695.6 billion roubles ($7.51 billion).
Gazprom Group fell to its first loss in 24 years in 2023 as EU sanctions took their toll on the group, with gas exports to the EU plunging 55% compared with 2022.
An internal Gazprom report obtained by the Financial Times last year suggested the group may not recover its pre-war export revenues until 2035 as it struggles to find alternatives to the lucrative European market.
The company has started to cut costs as a result of continued losses, reeling back years of exuberant purchases as the company basked in outsized energy revenues. In January, Gazprom confirmed it was considering laying off administrative staff amid reports headcount could fall by up to 40%.
Last year, Gazprom said it was selling off some of its luxury property assets, including a range of Gazprom-owned hotels, which it used to reward employees with holidays and to host conferences.
According to a report by Reuters, Gazprom is now considering selling off its palazzo-style export headquarters in St Petersburg, a direct result of falling demand to the West.
Indeed, Reuters’ report suggests Gazprom Export has reduced its number of employees from 600 prior to the invasion of Ukraine to a few dozen.
A representative for Gazprom didn’t immediately respond to a request for comment.
As revenues for the once-crucial energy sector dry up and Russia’s war with Ukraine moves into its fourth year, hopes are increasing for a peace deal to prevent a financial crash as Russia’s non-war related sectors come under strain.
Russia has attempted to offset the loss of its vital European energy export business by increasing trade with China. However, it hasn’t been able to replace the quantity of exports it enjoyed in Europe, while China has had more leverage to negotiate prices as Russia struggles to find buyers for its energy.
Vladimir Putin is due to speak with Donald Trump over the phone on Tuesday to continue peace talks over the war in Ukraine. Trump’s election has increased the likelihood of a peace deal as the U.S. threatens to pull military support for Ukraine. A ceasefire could open the door to the lifting of sanctions.
However, analysts are skeptical that Europe would return to become a willing buyer of Russian energy in the event that sanctions are lifted, with new suppliers being identified and alternative forms of energy receiving more funding since 2022.
This story was originally featured on Fortune.com
