Russia’s Gazprom to Support Africa Despite Financial Losses

By Kestér Kenn Klomegâh

At least, the foreign media broke the news in early May. And it may be understandable why local Russian media was quiet over the impact of Western and European stringent sanctions on Russia’s state-run gas corporation Gazprom, often described as the eternal life-wire of Russia’s economy. While Russian officials vehemently maintain that the government can withstand all negative steps being taken to cripple the economy, the latest reports detailing the net financial losses of Gazprom could also have desperate implications for Russia-African economic cooperation.

Bloomberg, Reuters, Agence France Press, British Broadcasting Corporation, Al-Jazeera and many other mainstream media wrote right after the report was released that Kremlin-owned gas giant Gazprom plunged to a net loss of 629 billion rubles ($6.9 billion) in 2023, its first annual loss in more than 20 years, as sales to Europe plummeted in the wake of Russia’s ‘special military operation’ in Ukraine. As a result of its actions in the neighbouring Ukraine, Russia has come under serious sanctions since then.

According to this author’s monitoring and analysis, Russia’s Gazprom has signed several bilateral agreements to leverage the various sectors, including energy and infrastructure and to engage in economic transformations across Africa. There has been that long-held resonating perception about Gazprom’s preparedness to support development trajectories, attempt the prompt realization of African energy dreams, and ensure sufficient energy to drive industrialization and in the process add immense value to the agricultural production in the continent whose population estimated at over 1.4 billion.

During the first and second Russia-Africa summits, Gazprom renewed its agreements with many African countries. The official pronouncements and discussions pushed the resonating message that Gazprom’s cooperation would promote energy stability, and share experience and technology with African countries it had signed bilateral agreements.

The chairman of the Russia-Sudan Business Council of the Russian Chamber of Commerce and Industry, Viktor Chemodanov, in an interview with Interfax Information News Agency in August 2023, stressed that Russian companies have become increasingly interested in energy and industrial projects in African countries over the past year. Gazprom, for example, has huge opportunities to address an acute shortage of electricity in Africa.

“There is oil there, but they don’t know what to do with it. In the exploration and extraction of oil and gas, colossal investments are needed in creating clusters. Gazprom and Gazprom Neft have projects, Lukoil is interested…both have oil extraction technology, and oil and gas equipment and we’re prepared to offer them,” Chemodanov underscored in the published interview.

In a similar argument, Russian ambassador Ilya Rogachev was quoted as saying in July 2023 that Gazprom’s experience in implementing liquefied natural gas and gas pipeline construction projects could be of interest to South African partners, and many others across Africa. Then an official media release listed potential beneficiary countries as Algeria, Angola, Ghana, Egypt, Equatorial Guinea, Kenya, Mozambique, Namibia, Nigeria, Tanzania and South Africa.

“Greater use of natural gas will help Africa solve a whole range of problems, from economic to social and environmental. We believe that Africa should fully discover the advantages of this fuel for itself,” the head of Gazprom’s foreign economic activities department, Dmitry Khandoga said during discussions. “We see potential in cooperation with African countries and can offer our unique experience and technological know-how. Gazprom is open to discussing constructive and mutually beneficial proposals that would facilitate economic development and improve the lives of people in African countries.”

The Russian-Angolan intergovernmental commission, for instance, also highlighted the Russian Ministry of Natural Resources and Environment in collaboration with Gazprom Neft has expressed high intention of developing joint projects with Angola.

The chairman of the African Energy Chamber, NJ Ayuk has reiterated that more than 600 million people in sub-Saharan Africa lack electricity. Meanwhile, experts estimate that Africa will account for more than 60% of global population growth by 2050. Along with urbanization in the region, there is expected to be substantial economic growth, which will be accompanied by a twofold increase in energy consumption. Demand for natural gas is expected to grow by 150%. In Africa, which needs industrialization, affordable and abundant natural gas will help create many new jobs and opportunities for capacity building, economic diversification and growth, according to NJ Ayuk.

Long before the two Russia-Africa summits, the above narratives abound in reports on collaboration in the energy sector. Speeches and statements pointed to the fact that Russia stands for a steadfast genuine economic partnership with Africa. But now, reliable information emerging indicates Gazprom is likely to defer potential projects in many African countries. According to the latest report from the Russian Ministry of Energy acknowledges the inextricable steps in addressing the unprecedented magnitude of energy challenges facing African countries in the continent.

Russian Foreign Ministry officials, however, declined questions about whether Russia will be ready to continue within the framework of the agreements. But at this same time, several separate interviews show that African leaders are wary of the likely impact and consequences of Gazprom’s financial status, the company was declared as making losses since 2023. Undoubtedly, such significant huge losses “clearly have both political and economic implications” for Africa. Due to its large projects, Africa is likely to hold (suspended) until the situation improves in future.

Gazprom has a long chequered history. President Vladimir Putin, to a large degree, controls the Gazprom. Putin fired Viktor Chernomyrdin from his position as the Chairman of the Gazprom board. In his place are Viktor Zubkov and Alexei Miller. Following Russia’s ‘special military operation’ in Ukraine since late February 2022, the threat by Russia of reducing the supply of gas to Europe risked the Gazprom export market. It has diverted supplies to the Asian region, especially to China and India.

The revenue of Gazprom, whilst initially supported by high prices collapsed in 2023 resulting in a trading loss and the need to increase the price in the domestic market by 34% over 3 years. Gazprom has also opened itself up to compensation claims for failure to supply gas under long-term contracts. On 31st March, Putin signed a decree − decree 172, requiring payment to be made by alternate means.