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Gazprom hits gold in the North Sea prompting stronger sanction calls

Participants walk in front of a large screen displaying the logo of Russia's energy giant Gazprom during the St. Petersburg International Gas Forum (SPIGF) in Saint Petersburg
Participants walk in front of a large screen displaying the logo of Russia's energy giant Gazprom during the St. Petersburg International Gas Forum (SPIGF) in Saint Petersburg Copyright AFP
Copyright AFP
By Indrabati Lahiri
Published on Updated
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The majority state-owned Russian oil company has clocked in millions worth of profits in the last year across Dutch and UK oil fields.

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Gazprom, one of Russia’s largest energy companies, has reported profits of about €45 million, through its UK subsidiary Gazprom International UK. 

The gains represent an increase of about 9% from the last year, with most of it having come from the Sillimanite oil field, spread across Dutch and UK waters and operated jointly by German energy company Wintershall and Gazprom.

The oil and gas drilled from the Sillimanite oil field is mostly taken to the Netherlands to be processed, thus not entering the UK. 

However, Gazprom International UK still pays about €29 million in Netherlands and UK tax. It has also paid about €41 million in dividends to the company’s immediate Dutch  owner, Gazprom International Projects BV, which is ultimately owned by PJSC Gazprom in Moscow.

Investors have highlighted their concerns about Gazprom potentially using its profits to continue funding Russia’s invasion of Ukraine, dragging out the conflict even longer.

Following the release of Gazprom's financial results, there have been increasing calls for the UK government to tighten sanctions on Russian energy companies, so that Russia cannot divert the income received from its vast energy reserves and exports into its Ukraine invasion. 

Currently, Europe still imports gas from Gazprom, although much less than prior to the war.

According to Sir Ed Davey, former energy secretary and leader of the UK's Liberal Democrats party, it is "totally unacceptable" that gas drilled from UK territories has been giving strength to "Putin’s illegal war against Ukraine".

In response, the UK government has already pledged to further increase sanctions against Russia and potentially look into sanctioning Gazprom as well. Although the company itself is still free of any external restrictions, several employees and executives, including CEO Alexei Miller, have already been slapped with sanctions.

Elena Burmistrova, ex-head of Gazprom Export, and Vitaly Markelov, the acting head, have been amongst some of the employees sanctioned following Burmistrova's exit. Furthermore, Vyacheslav Mikhalenko, head of transport at Gazprom Pao and Gennady Sukhov, head of hydrocarbons have also faced restrictions.

Global Witness, a campaign group, has also further denounced the UK government’s strategy regarding the issue, which critics have slammed as lax.

The group highlights: "While the government decries the war, it’s absurd to allow the subsidiary of a Russian state enterprise which has its own militia fighting in Ukraine to enrich Putin’s regime from the North Sea."

Gazprom had already faced intense heat following Russia stopping European gas shipments via the Nord Stream 1 pipeline last year, following pipeline leaks. Speculations of Russia intentionally sabotaging the pipelines were also rife at the time, as well as countering accusations of pro-Ukrainian groups being involved.

As part of existing sanctions, the EU has already restricted gas storage facilities to Russian nationals and companies. Furthermore, it is now much harder for Russian individuals and companies to hold decisive posts in the operation and ownership of critical infrastructure across the EU.

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