Despite formal indications of growth in the Russian economy, many of its flagship firms are experiencing serious problems, reports from key Russian companies show. Businesses are losing markets. They face rising costs due to logistical problems and exchange rate fluctuations. And their debts are mounting. In response, major players like Gazprom, Nornickel, and Rusal have suspended dividend payments, while others are asking for help from the state, considering relocating their operations to China, and passing on costs to Russian consumers.
According to official reports, the Russian economy is growing. But that doesn’t mean it is healthy. Oleg Vyugin, a professor at Moscow’s Higher School of Economics, describes the country as “turning into a cauldron,” isolated from the outside world’s sanctions, yet flush with cash. Under these conditions, some businesses are indeed thriving. Others, however, find themselves competing in a wage race for suddenly scarce workers, scrambling to find buyers after losing international clients, and cutting costs by halting dividend payments to shareholders.
The situation varies even within similar sectors. The oil industry, buoyed by high prices, appears relatively successful — as can be seen from state giant Rosneft’s official statistics. In contrast, gas producers are struggling. It is far from easy to get a general view of corporate health in Russia: some companies have stopped publishing reports altogether, or have provided limited data since the start of Russia’s full-scale invasion of Ukraine. International ratings agencies have left the country, and the international edition of Forbes no longer includes Russian corporations in its lists.
The Insider has collected several illustrative examples from various sectors of the Russian economy. They highlight the range of economic experience under sanctions — from prolonged absences of profitability, to sudden declines in profit, to sustained and seemingly irreparable losses.
Gazprom is now an oil company
Gazprom has been severely impacted by the war — this despite the fact that Western countries have not sanctioned gas delivered by pipeline. The company recently reported its first losses in 25 years: a staggering 629 billion rubles (approximately $7.16 billion) in 2023 alone. While the explosion of both Nord Stream pipelines in September 2022 deprived Gazprom of one shipment route to European markets, the Russian government’s tax take of 600 billion rubles also contributed to the gas giant’s poor balance sheet performance.
What’s more, it is the company’s gas business that is unprofitable. While China could potentially replace Europe as a major buyer, a new gas pipeline is needed. Europe was supplied from West Siberian fields, whereas China is supplied from East Siberian fields through the Power of Siberia-1 pipeline. The proposed Power of Siberia-2 pipeline, which Beijing is in no hurry to approve, would connect these fields.