Russia's energy sector is facing a new setback as gas production levels plummet to figures not seen since the 1970s.
According to Gazprom, Russia's state-owned energy giant, the country produced only 179.45 billion cubic meters of gas in the first half of 2023.
This marks a staggering 24.7% year-on-year decrease and a 26.5% drop in supplies to both domestic and international markets.
Sanctions and isolation
The decline in production comes in the wake of Russia's invasion of Ukraine, which led to international sanctions that have isolated Russia from the global economy.
These sanctions have severed Russia's access to the SWIFT international banking system and frozen some of its foreign exchange reserves. Additionally, Europe has drastically reduced its purchases of Russian oil and gas, opting for alternative suppliers like seaborne liquefied natural gas (LNG) sellers.
The repercussions of this decline are far-reaching. Analyst Thomas O'Donnell notes that Russia's strategy to manipulate gas supplies to the European Union has backfired.
The increase in supplies from the United States, Norway, and Qatar has allowed the EU to resist Russia's tactics. O'Donnell adds that without new, expensive pipelines to China, Russia's vast gas resources will remain stranded assets.
Gazprom's report aligns with predictions by Russian state bank VEB, which anticipates a significant drop in Russia's natural gas exports to the European Union.
The bank forecasts that exports may fall to 21 billion cubic meters, a six-fold drop from 2021 levels. Even attempts to boost trade ties with China during President Putin's upcoming visit are unlikely to offset the losses from the European market.