In 3 War Years Russia Will Have Spent $312 bn on the War, and $71 bn on Gazprom Capital Investments

Recently media has been posting that Gazprom has reported an annual operating loss of $7 billion — its first in twenty years.

However, I find there are other more interesting aspects to Gazprom’s finances.

In 2024 Gazprom plans to spend $17 billion in capital investments, having spent $21 billion on the same in 2023, and $33 billion in 2022.

The decline from 2022 to 2023 is merely due to ruble devaluation. In ruble terms, 2 trillion were invested in each of these years, with 1.6 trillion to follow in 2024.

In three years then Gazprom will have spent $71 billion on new production, transport and refining (it also has an oil branch) capacity.

This compared to Russia spending $86 billion on the military in 2022, $109 billion in 2023, and $117 billion planned for 2024. This comes out to a combined $312 billion.

In other words, in three war years, (a war involving NATO with 100,000 Russians dead so far) Gazprom alone will have invested 23% of what Russia has invested into the war, into the gas business. 

$312 billion for the war, $71 billion for Gazprom to develop gas and oil fields, build pipelines, refineries, LNG terminals.

For more context, Gazprom capital investments in 2022 were equal to 1.4% of Russia’s entire GDP. As well as 1.2 percent of GDP in 2023 and, 0.9 percent in 2024.

There are two ways to look at this. One is to say that it’s good that Russia continues to make the investments that will sustain its revenue in the coming years and decades.

For example, Gazprom is contractually bound to up its export volume through Power of Siberia to China from 22 bcm to 38 bcm by 2025. That for one sounds like a project that ought to be completed, not least because the payoff is assured and will come soon.

However, in the energy business, the nature of most investments is such that they won’t be recouped for decades, and in the meantime there is a war raging with 120 Russian dead daily.

There is an opposite argument to be made that Russia ought to stop these lavish peace projects and for a time being direct all energies to getting herself out of the Ukraine quagmire as soon as possible.

Instead, the approach Putin has landed on after September 2022 has been to resource the war in the way that can be sustained forever, but in a way that is indifferent to Russia’s battlefield fortunes.

On the one hand, at 6% GDP war spending and low levels of forced mobilization relative to population size, Russia really isn’t accumulating all that much war exhaustion, and can keep soldiering on forever.

But on the other hand, the current war investment can’t guarantee much more than the sustainment of a conflict that is protracted and indecisive, with the only real path to its conclusion being that Ukraine’s own war exhaustion eventually causes her to cry uncle.