As access to revenue and foreign credit becomes tighter in Russia, members of the Kremlin's elite are busy shoring up their positions and the assets and businesses they support. Russia's energy sector, which has long been a battleground for heavyweight politicians and firms, is one of the most crucial economic sectors being braced for shaky financial conditions. Russia's two largest energy firms, Gazprom and Rosneft, are attempting to secure continued access to funds, control over strategic projects and Russian President Vladimir Putin's political favor. The Kremlin will ensure that both firms survive the crisis, but it will balance their individual interests with the larger interests of the Kremlin and Russia.
Gazprom announced Jan. 27 that it would cut its capital expenditures for 2015 by nearly 20 percent to $30 billion. In 2014, Gazprom abandoned one of its more ambitious projects, the South Stream pipeline. Though the company said political pressure from Europe led it to abandon the project, the heavy costs involved certainly were a factor. Gazprom will bear a heavy financial burden in the coming years, with many large-scale projects planned or underway.
When it announced its capital expenditure cuts, Gazprom was sure to emphasize that its projects involving Asia, particularly the Power of Siberia pipeline to China, would not be cut. Instead, as Stratfor sources reported, Gazprom will postpone new projects to supply Europe, such as the Baltic liquefied natural gas project, and production at various Yamal fields and the Yamal liquefied natural gas project. This confirms that Russia is looking for alternative natural gas customer bases as tension lingers between Russia and Europe and as Europe continues its attempts to diversify away from Russian energy supplies.
Just as Gazprom is focusing on sending natural gas supplies eastward, so too is it looking to the east to secure alternative funding. The firm was listed on the Singapore exchange in June 2014 and said in January that it could also list on the Hong Kong exchange. Moreover, China's top credit rating agency, Dagong, assigned Gazprom its highest rating — AAA — on Feb. 1, in stark contrast to the negative watches from Western agencies Fitch, Standard & Poor's and Moody's.
Gazprom and China National Petroleum Corp. signed a landmark $400 billion natural gas deal in June 2014, under which the Russian firm will supply 38 billion cubic meters (bcm) of natural gas to China per year starting in 2019. Gazprom expanded this deal in November, adding another 30 bcm annually. Gazprom and China National Petroleum Corp. have tentatively agreed to a $24.5 billion pre-payment and $25 billion loan to contribute to the construction of the Power of Siberia pipeline and the necessary fields. However, it is not clear when those funds will reach Gazprom's accounts during the current financial crisis.
