“gazprom” Is in the Red, Even When in the Black

russian energy giant “gazprom” did report a nominal improvement in its financial results for the first quarter of 2026, but the actual state of affairs points to deepening systemic problems.

The company reported 147.5 billion rubles in net profit, compared to a loss of 18.1 billion rubles a year earlier. However, this growth is merely “on paper” and is not linked to an improvement in operating performance.

The key factor was a sharp reduction in so-called other expenses – from 626.8 billion rubles in the first quarter of 2025 to 177.4 billion rubles in 2026. It is this item that includes foreign exchange losses and the revaluation of financial assets, making the financial result dependent on accounting adjustments rather than actual business growth.

At this, key indicators remain stagnant. Revenue remained virtually unchanged – 1.79 trillion rubles versus 1.80 trillion a year earlier – while cost of sales fell only slightly to 1.11 trillion rubles from 1.16 trillion. This indicates a lack of growth in demand and efficiency.

Limited export opportunities are an additional sign of weakness. Although gas supplies to the EU via the “Turkish Stream” pipeline have increased slightly (to 4.98 billion cubic meters), overall dependence on the European market continues to decline under pressure from sanctions and regulatory restrictions.

Part of the improvement in financial performance is actually driven by the domestic market – that is, by russians themselves. “gazprom”’s results began to improve following a sharp increase in gas tariffs in russia: in 2025, they rose by an average of 14.85%, marking a record high since 2014. And according to the macroeconomic forecast by the ministry of economic development of the rf, in 2026–2028, rates will be further indexed by additional 27.9%, effectively bringing them in line with total housing and utility payments.

The situation may deteriorate significantly in the near future. In June 2026, the EU will impose a ban on imports of russian pipeline gas under short-term contracts, and starting in 2027, similar restrictions will apply to long-term agreements as well. This means a further reduction in foreign exchange earnings for the rf.