Russian energy giant Gazprom saw its natural-gas July production slump to lowest level since 2008

Business Insider US
Russian President Vladimir Putin. MIKHAIL KLIMENTYEV/Getty Images
Russian President Vladimir Putin. MIKHAIL KLIMENTYEV/Getty Images
  • Gazprom's July output was 774 million cubic metres a day — a 14% on-month dip.
  • Russia recently slowed gas flows to Europe via a major pipeline, citing technical challenges.
  • Russia is collecting bumper revenues, but sanctions stand to hurt its economy in the longer term.
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Russian state-energy giant Gazprom saw its daily natural-gas production slump to its lowest level since 2008, according to a Bloomberg calculation published on Monday. The fall in output came as Russia slowed gas flows to Europe, citing technical challenges arising from sanctions over the Ukraine war.

Gazprom's production in July was 774 million cubic metres a day — 14% lower than in June, according to Bloomberg calculations. The company's production this year-to-date is 12% lower than the same period in 2021.

Overall, Gazprom's July exports to countries outside the former Soviet Union dropped about a quarter from June, even as daily supply to China increased steadily, per Bloomberg.

Europe depends on Russia for 40% of its natural-gas needs, such as cooking in homes and firing up power stations. As Russia is a major natural-gas supplier to Europe, the natural-gas crunch has sent prices soaring this year, in turn supporting the Kremlin's coffers.

Since it invaded Ukraine on February 24, Russia's revenue from oil and gas exports to Europe have more than doubled compared to the average in recent years, the International Energy Agency wrote on July 18.

While the upcoming winter will be challenging for Europe, it's the Russian economy that stands to be "hurt the most" in the long run by the shifting natural-gas supply chains, a Yale University analysis found. 

That's because "the importance of commodity exports to Russia far exceeds the importance of Russian commodity exports to the rest of the world," the Yale researchers wrote in the analysis, released July 20.

The European Union has agreed to end almost all its oil imports from Russia by the end of this year and has said it will cut coal imports starting in mid-August. European countries including Germany and Italy are also working to wean themselves off Russian gas.

To mitigate the impact from lower energy sales to Europe, Russian President Vladimir Putin is hawking Russia's energy exports to other markets, such as Asia — but at a discount.

"It now deals from a position of weakness with the loss of its erstwhile main markets," the Yale team wrote, adding that Russia's strategic position as a commodities exporter had "irrevocably deteriorated."

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