Die Welt (Germany):
Eduard Steiner
On the same day that the world’s largest gas concern Gazprom published its latest quarterly report, the Central Bank and Customs service of Russia took care of a real sensation. And I must say that for Gazprom, the main gas supplier to Europe and Russia’s largest taxpayer, these figures were stunning.
For the first time in its history, Russia has made more money by exporting gold rather than gas. The figures relate to the expired second quarter and the gas transported through pipes, the monopoly on exports of which belongs to Gazprom.
And these figures show that in April and may alone, Russia sold abroad 65.4 tons of gold worth 3.6 billion dollars (about 3.1 billion euros). During the same time, the profit from gas exports amounted to $ 2.4 billion (about 2.1 billion euros). There are no final data yet, but calculations by the Central Bank of Russia show that gas exports for the entire quarter brought the country only 3.5 billion dollars (3.0 billion euros) — that is, less than gold exports in just two months.
Official statistics reflect the chaos in global hydrocarbon markets caused by the coronavirus outbreak. And they also show an extraordinary increase in the value of gold and its prices: after all, the yellow metal on Monday night set a new record at the level of 1921 dollars per ounce. In other words, cautious investors see it as a major lifeline in troubled times. But that’s not all.
After all, in the dramatic situation in which Gazprom has fallen, it is not only the coronacrisis that is to blame. The gas giant, whose largest co-owner is the state, has reported a huge drop in profits since the first quarter.
For the first time since the fall of 2015, Gazprom even suffered losses of 116.2 billion rubles (1.4 billion euros), while for the same period last year there was a net profit of 536 billion rubles (6.4 billion euros). Turnover fell by 24.1% to 1.74 trillion rubles (20.3 billion euros), and exports to Europe — the main market for Gazprom — fell by 45%.
The ruble is losing in price
At the same time, Gazprom was not lucky with a serious fall in the ruble exchange rate in March, especially since the concern has 70% of its debts in dollars and euros. However, the depreciation of the ruble is only part of the problem.
Another part of it is that supplies to Europe and China (recently the second most important market for Gazprom) have declined by 17% due to market and climate reasons, and prices have fallen by an average of 36%. In the second quarter, the decline in sales and prices increased even more. Analysts of the investment company BCS Global Market Research predict that the situation with Gazprom’s profit in the European market in the second and third quarters will be “terrible”.
But the oligarch Suleiman Kerimov is very profitable for the turmoil in the commodity markets. He is the main shareholder of Polyus-Gold concern, Russia’s largest gold producer. The fortune of the 54-year-old native of Dagestan in the second quarter grew, presumably, by 8.8 billion dollars and reached 18.8 billion.
Thus, Kerimov rose in the Russian Forbes list from 13th to 7th place, for the first time in 12 years, getting into the top ten. In recent years, he has more often attracted attention to his person by various scandals.
For example, in November 2017, as soon as he stepped off the ramp of a private plane in nice, he was detained by the French police on suspicion of non-payment of taxes. Three days later, he was released on bail of 5 million euros. In Russia, the detention of Kerimov, who owned numerous properties in France, caused a wave of outrage, as the French side ignored his immunity as a member of Parliament.
Another scandal occurred in 2008, when Kerimov at the wheel of a Ferrari (and in the passenger seat at this moment sat a pretty Russian TV presenter) crashed into a tree in nice. Kerimov, a married father of three, suffered severe burns and went to Brussels for surgery. Later, he donated a million dollars to a Belgian Foundation for helping burn patients.
In 2017, Russian President Vladimir Putin awarded him the order of merit for the Fatherland, 2nd class.
The Russian Central Bank allowed the export of gold
Kerimov’s breakneck growth in income during the coronacrisis is due to the fact that his family owns 78.6% of the shares of Polyus-Gold. This concern, whose shares have soared in price along with the prices of the yellow metal itself, plays in the world’s top League of commodity markets and has an advantage over all others: its production costs are almost minimal.
The rapid growth of Polyus-Gold’s profits was made possible in part by the Russian Central Bank. On April 1, its management announced the transition to a new course. Before that, the Central Bank was one of the main buyers in the gold market. Now the regulator has refused to buy and allowed direct sales of the yellow metal abroad to manufacturers.
There was no shortage of demand. Many States are very interested in Russian gold. The main buyer, which accounted for up to 80% of sales, was the UK (which in many other areas defiantly refuses to cooperate with the Russians). London is home to the main trading platforms and physical gold storage facilities.
Gazprom can only dream of such a demand for gas, especially since along with the collapsed demand, the concern soon risks facing other problems that have their roots in the United States.
The Americans are out to interfere with the completion of the pipeline “Nord stream — 2”, which connects Russia and Germany. They claim that Europe may become overly dependent on Russia (however, they are silent about the fact that they intend to increase the supply of their own liquefied gas to the Old World).
US Secretary of state Mike Pompeo said on July 15 that the Russian gas pipeline is subject to an American law passed in 2017, which provides, in particular, sanctions against companies doing joint business with Russia, as well as countries such as Iran and North Korea.
The US seeks to prevent the completion of the second ” Nord stream»
Pompeo’s statement was just one of many steps the United States has taken in this direction. They had previously tried to prevent the completion of the Nord stream 2 gas pipeline by threatening its participants with sanctions. The restrictions, which came into force at the end of 2019, were aimed at the company that owns the pipe — laying ships involved in the project.
Thus, the construction of the gas pipeline has been suspended, but will soon continue with the participation of a Russian specialized vessel. President Putin managed to optimistically state that the project will be completed in early 2021 — with a delay of several months. At the same time, he enjoys the support of German politicians who oppose US interference in German Affairs.
Gazprom itself is struggling to maintain its leading position in the European market. In this regard, the concern engaged in dumping at the end of last year and at the beginning of this year. Gazprom representatives, despite the negative results in the first quarter and disastrous in the second, are confident that the market has already reached the bottom and pushed back from it, so that the situation will level off towards the end of the year.