In a major blow to one of Russia's largest companies, Gazprom, the Kremlin-owned gas giant, announced a net loss of 629 billion roubles ($6.9 billion) for the year 2023. This marks the company's first annual loss in over 20 years and underscores the significant decline in gas trade with Europe, once its main sales market.

The disappointing results, released on Thursday, highlight the downward trajectory of Gazprom, which has long been considered a powerful entity in Russia. The company has often been used as leverage to resolve disputes with neighboring countries, such as Ukraine and Moldova.

Analysts had projected a net income of 447 billion roubles ($4.81 billion) for Gazprom, according to the Interfax news agency. However, the final figures presented by the company displayed a stark contrast, indicating the severity of the current situation.

This loss is the first since the late 1990s/early 2000s when Alexei Miller, an ally of President Vladimir Putin, assumed control of Gazprom in 2001. Previous to this setback, Gazprom had reported a net profit of 1.2 trillion roubles ($12.9 billion) in 2022.

The decline in Gazprom's fortunes can be traced back to heavy losses incurred during the late 1990s when the company accrued significant foreign-currency debt, further exacerbated by the financial crisis of 1998.

Reflecting the impact of these developments, Gazprom shares in Moscow experienced a decline of approximately 3.3 percent at 13:07 GMT.

Russia's gas exports to Europe, previously its primary export market, have been severely affected by the political fallout from the invasion of Ukraine. Gazprom, which holds a monopoly on gas exports, has been particularly vulnerable to Western sanctions, emerging as the most tangible victim.

In addition, Gazprom's efforts to bring natural gas to local households have also contributed to its financial challenges. The company reported a net loss of 364 billion roubles ($3.92 billion) from sales in 2023, in sharp contrast to a profit of 1.9 trillion roubles ($20.4 billion) in the previous year.

The company's total revenue also plummeted, falling to 8.5 trillion roubles ($91.5 billion) in 2023 from 11.7 trillion roubles ($126 billion) in 2022. Furthermore, Gazprom's core profit, measured by earnings before interest, taxes, depreciation, and amortisation (EBITDA), dropped significantly to 618.38 billion roubles ($6.66 billion) last year from 2.79 trillion roubles ($30 billion) in 2022, according to calculations by Reuters.

Gazprom's natural gas supplies to Europe witnessed a staggering decline, plummeting 55.6 percent to 28.3 billion cubic meters (bcm) in 2023, as per Reuters calculations. However, Gazprom has not released its own export statistics since the beginning of 2023.

Ronald Smith from Moscow-based brokerage BCS Global Markets commented, "The full-year EBITDA of $7.2 billion was the worst in 22 years, since the company reported $7.6 billion in 2002," underscoring the magnitude of Gazprom's current predicament.

As Gazprom grapples with falling gas trade and mounting losses, the company will undoubtedly face significant challenges in its efforts to restore profitability and regain its former status as a powerhouse in the Russian energy industry.