Russia’s state-controlled natural gas company Gazprom has felt the impacts of Western sanctions as it clocked a huge drop in its fiscal year 2022 profits, which is 41% lower than in 2021, at 1.226 trillion rubles ($15.4 billion). Meanwhile, Russian oil giant Rosneft and LNG giant Novatek have shown stronger results. Although Gazprom cited a windfall tax imposed by Moscow as the reason for the plunge, it’s more likely that Western sanctions are the main reason behind the falling profits. The state controlled company has decided not to pay dividends for the entire year 2022, having previously paid an interim dividend of 1,208 billion rubles ($15 billion) last autumn for the results recorded in the first half of 2022.

Although Gazprom’s natural gas exports were not directly affected by the sanctions, export volumes were still cut in half to 101 billion cubic meters (bcm) in 2022 as Europe dramatically cut gas imports from Russia. Gazprom is the world’s largest producer of natural gas, having produced more than 18 trillion cubic feet in 2021, and is also one of the largest contributors to the Russian budget.

Gazprom also announced it would increase capacity of natural gas reserves in its internal storages to record levels next winter, as exports have dwindled significantly. The company plans to store 72.842 bcm in its operational gas reserves in underground storage facilities, with a maximum daily capacity of 858.8 million cubic meters.

Gazprom’s exports have continued to fall in the current year, dropping to 67 million cubic meters per day in the first half of May, down from 75.6 million cubic meters per day in April. Russian gas deliveries to Europe this year are so far averaging around 9.1 bcm, way lower than the 62 bcm average in 2022.

As profits plunge, Gazprom’s spending plans could also take a hit.

Back in December, the company approved a record spending of 2.3 trillion rubles ($33.1 billion) for the current year.

The latest set of results also suggest that the natural gas price caps set by the EU last year are working. After initially hitting a dead-end amid deep divisions, EU ministers reached an agreement to implement a  gas price cap of €180/MWh, lower than the €275/MWh trigger originally suggested by the European Commission.

Pro-cap countries including Poland, Belgium and Greece had dismissed the original cap proposal as too high, arguing that it needs to be below €200/MWh if it is to tackle the high gas prices that the continent has grappled with this year. Germany also voted to support the price cap despite having reservations that the price cap will negatively impact Europe’s ability to attract gas supplies in tight and price-competitive global markets. Under the price cap, prices would not fall below €188/MWh, even in the event that the LNG reference price falls to far lower levels.