The Kremlin will receive about $10 billion in dividends from Russian state energy giant Gazprom after the company posted record profits in the first half of the year. That could be a major blow to the West, which has been trying to damage the Russian economy in Ukraine since the start of the war.
The Russian government owns a 50.2 percent stake in Gazprom, which means it will receive about half of the dividends. Gazprom will pay out a total of about $20 billion to shareholders, or about 1.2 trillion rubles. The stakeholders will meet on September 30 to approve the payment.
The news was released after Gazprom released its first half earnings figures on Tuesday. The company is doing well: from January to June it made a monster profit of 2.5 trillion rubles, or almost 42 billion dollars.
That’s an increase of more than 150 percent from the same period in 2021, when Gazprom posted just under a trillion rubles in profit. After the figures were announced, shares of the gas giant skyrocketed by about 25 percent. However, they are still a lot lower than before the war in Ukraine. After all, after that, the value of Gazprom shares plummeted. The price dropped before the war started and during the first days of the invasion by about 40 percent in a few weeks.
If the dividends are paid, it could partially sabotage the West’s attempts to hit the Russian economy. Those sanctions were intended to limit the Kremlin’s resources to wage the war. The West, especially Europe, is now experiencing significant economic damage itself as a result of the sanctions, raising fears that if the Russian economy is not hit hard enough, European powers’ support for Ukraine could dwindle.
After all, Europe is in for a particularly tough winter. Due to the unprecedented high gas and energy prices, European countries are forced to take measures to reduce energy consumption. Before the war, Russia was responsible for almost half of all gas that Europe imported. The country also exported huge amounts of oil to the continent, which plans to impose an embargo on Russian black gold from December.
While Europe is poised to give up Russian oil, it is more difficult to wean off natural gas. Russia is taking advantage of that fact too eagerly by severely restricting how much gas flows to the continent through the important gas pipeline Nord Stream 1 in July. Russia claims technical problems are at the root of the problem, but Europe claims Putin uses gas as a weapon to pressure the continent.
For that reason, the continent is looking for other suppliers of the important fossil fuel. The United States (US), Algeria, Canada and Qatar, among others, could ease the pressure on the European energy market. In the meantime, Europe is building floating gas terminals to receive gas from those countries. But that could mean that Europe will remain dependent on fossil fuels in the long term, according to some experts, dampening the continent’s climate ambitions.