Gazprom’s Profit in North Sea Raises Concerns and Fuels Political Tensions

Gazprom, the Russian energy giant, made a significant profit of £39 million from its gas field in the North Sea. The earnings come from gas production in the Sillimanite field, which spans both UK and Dutch waters. However, the news has sparked controversy and political tensions, as critics argue that gas from the UK territory is indirectly supporting Russia’s actions in Ukraine.

Sir Ed Davey, leader of the Liberal Democrats, condemned the situation, calling it “totally unacceptable” that gas from UK territory is contributing to “Putin’s illegal war against Ukraine.” The government expressed its intention to increase economic pressure on Russia, aligning with the UK, the US, and the EU’s efforts to limit Russia’s ability to profit from energy exports and fund the conflict in Ukraine.

The joint venture between Gazprom and German company Wintershall operates the Sillimanite field, with gas transported onshore in the Netherlands. While there are no indications of any legal wrongdoing in this arrangement, Gazprom executives, including CEO Alexei Miller, face UK government sanctions. Nonetheless, Gazprom continues to supply gas to continental Europe, albeit at reduced volumes since the war began.

Gazprom International UK, a subsidiary of the Russian energy giant, reported a pre-tax profit of £39 million in 2022. It distributed a dividend of £41 million to Gazprom International Projects BV, its immediate owner in the Netherlands, and an additional £1.7 million dividend in June. PJSC Gazprom, based in Moscow, serves as the ultimate owner of the company.

The news has generated criticism and concerns about the UK’s approach to Russian oil and gas. Campaign group Global Witness stated that it is “absurd” to allow a subsidiary of a Russian state enterprise, which funds its own militia in Ukraine, to profit from the North Sea. They deemed it an “indictment” of the UK’s stance on Russian oil and gas.

In response, a government spokesperson emphasized their commitment to working with international partners to restrict Russia’s access to goods and technologies used in warfare. They reiterated their determination to impose economic pressure and prevent any circumvention until Ukraine’s sovereignty is ensured and peace is restored.

Gazprom’s total tax payment amounted to £29 million, shared between the UK and Dutch governments. The taxes include the UK windfall tax on energy companies, amounting to £4 million due to price surges during the Ukrainian conflict, and a further £5 million under the Dutch equivalent.

Importantly, Gazprom International UK’s revenues solely arise from sales outside the UK. The company terminated its gas sales agreement with Wintershall in September and entered into a new agreement with Swiss-based trading company Gunvor, as revealed in the accounts.

It is worth noting that Gazprom’s UK energy supply business was nationalized by the German government and renamed SEFE Energy after its parent company’s near-bankruptcy. Wintershall and Gazprom have yet to comment on the matter.

The news of Gazprom’s profitable ventures in the North Sea is likely to have significant impacts and raise concerns on multiple fronts. It fuels ongoing political tensions between Russia and countries supporting Ukraine, particularly the UK, US, and EU. Domestically, it provokes criticism of the UK’s stance on Russian involvement in oil and gas operations. Additionally, it draws attention to the financial implications of such dealings that may indirectly contribute to supporting conflicts around the world.

Moving forward, stakeholders should be cautious about the potential consequences and implications of Gazprom’s profits from the North Sea. It could lead to further diplomatic disputes, stricter regulatory measures, and potential changes in energy policies. Criticisms of the UK’s approach to Russian oil and gas may spur calls for greater transparency and accountability in future dealings. Furthermore, the situation highlights the need for continued efforts to reduce dependencies on fossil fuels and transition toward more sustainable and secure energy sources.