WThe extent to which Russia is currently benefiting from the high oil and gas prices is shown by news from the end of May: The country’s largest oil company, Rosneft, announced that it would pay out a record dividend totaling the equivalent of around 7 billion dollars, which was about half of the annual corresponds to net profit. The gas company Gazprom, which is state-controlled like Rosneft, had previously announced a higher distribution than ever before to its investors.

And yet the prospects for Rosneft this year are bleak. A successful year like 2021 – when the group was able to increase its net income calculated in dollars to an unprecedented 11.7 billion dollars as the global economy recovered – is unlikely to be repeated. From the company’s point of view, this year also got off to a good start: after Russia’s attack on Ukraine and in anticipation of the EU oil embargo coming into force at the end of the year, the oil price continued to skyrocket. Rosneft can even get over the fact that it is currently having to sell its oil at significant price reductions of around 30 percent because of the sanctions and the voluntary withdrawal of Western buyers.

At the same time, however, it became clear in May that the group was already being hit much harder by western sanctions than its Russian competitors, months before the EU embargo on a large proportion of Russian oil supplies came into effect. According to data from the Russian Energy Ministry, analyzed by the Bloomberg news agency, Rosneft accounts for two-thirds of the drop in Russian oil production since the invasion of Ukraine. The group is only responsible for 40 percent of oil production in the country. So Rosneft has had to reduce its production more than others. According to Bloomberg, the proportion of inactive wells at Rosneft rose from 17 percent in January to 30 percent in April. Overall, according to the Russian statistical authority, the production of oil and the by-product natural gas condensate fell by 11.5 percent in April compared to March.

Rosneft technologically backward

There are several reasons why Rosneft was hit so hard: On the one hand, the US import ban on Russian oil that was imposed at the beginning of March played a role, since it affected heavy oil deliveries to the Gulf Coast, which are important for Rosneft as Russia’s largest refinery operator. Added to this, according to Russian oil expert Mikhail Krutichin, is the problem that the Rosneft refineries in Russia are “technologically much more backward” than those of their competitors. They supplied a lot of masut heating oil and petroleum, which is in less demand in Europe – this and the voluntary departure of many dealers are forcing Rosneft to reduce production.