Gazprom has its work cut out for it this new year. The Russian gas firm expects to see production hit an all-time low in 2014 as ongoing problems with the company’s Ukrainian contract, as well as Western sanctions, have sent European policymakers scurrying to secure new sources of gas. Reuters reports:
Gazprom, which supplies a third of the European Union’s gas consumption, estimates its exports to the EU and Turkey declined in 2014 by more than 9 percent to 147 bcm.“It’s not relevant how much we will produce in 2015, output will depend on our ability to sell,” Kupriyanov said. Gazprom’s earlier forecast for 2015 called for a rise in gas production of 5 percent.
Moscow has a history of leveraging its prodigious oil and gas reserves in geopolitical standoffs with Europe, but as we’ve noted before, that energy weapon cuts both ways. Gazprom’s buyers are understandably skittish, and with the possibility of importing LNG from countries around the world—including the United States—Europe is actively strategizing about how to diversify away from Russian supplies.This is bad news for Russia. Western sanctions, decreased gas deliveries, and a plunging price of oil well below the level Moscow requires to balance its budget are all battering the Russian economy. Russia’s Economy Ministry reported a sharp contraction these last two months, and estimates a 4 percent drop in GDP for 2015. Putin has run roughshod over his opposition in 2014, but 2015 looks to be a different animal altogether.