Russian energy giant Gazprom is considering slashing hundreds of administrative jobs at its St. Petersburg headquarters, a company spokesperson confirmed on Monday January 13, signaling the impact of lost European export markets and the end of gas transit agreements with Ukraine. The move comes as the company grapples with its first net loss in over two decades.

A letter circulating in Russian media, confirmed as authentic by Gazprom, reveals a proposal to cut approximately 40% of the headquarters’ workforce. Deputy Chairperson Yelena Ilyukhina, in a letter dated December 23, 2024, to Gazprom chief Alexei Miller, suggested reducing staff from over 4,100 to 2,500. Ilyukhina cited the need for faster decision-making and criticized “excessive bureaucratic processes” as driving forces behind the proposed cuts. The layoffs would reportedly not impact employees at production facilities.

The confirmation follows the January 1 expiration of long-standing gas transit agreements between Russia and Ukraine. These agreements had generated substantial revenue for both countries but ended as Ukraine sought to sever financial flows to Russia amidst the ongoing conflict.

Gazprom, historically a key revenue source for the Russian government, reported a net loss of nearly $7 billion in 2023, marking a significant downturn for the company. The loss underscores the impact of reduced gas exports to Europe, once Gazprom’s primary market.

Prior to the conflict in Ukraine, Russia supplied nearly 45% of the EU’s total gas imports in 2021. This share plummeted to under 15% in 2023 as the EU sought to diversify its energy sources and reduce reliance on Russian fossil fuels. The EU aims to completely phase out Russian fossil fuel imports by 2027.

In response to declining European sales, Gazprom has attempted to redirect its gas exports to new markets, primarily China. However, despite increased sales to China in recent years, Beijing has yet to approve a new long-term supply contract or a deal to construct the Power of Siberia 2 pipeline. This pipeline project, if realized, would enable Gazprom to divert gas from fields previously supplying Europe to the Chinese market.

Gazprom spokesperson Sergey Kupriyanov confirmed the authenticity of Ilyukhina’s letter but declined to comment on whether Miller had reviewed it or made a decision regarding the proposed job cuts. This lack of official confirmation regarding the implementation of the proposed layoffs leaves the fate of hundreds of Gazprom employees uncertain.

The potential job cuts, coupled with the company’s recent financial struggles, highlight the significant challenges Gazprom faces in adapting to a rapidly changing global energy landscape.