• High natural gas prices have put Gazprom on track for record profits this year.

• The Russian energy giant is exploring strategies to buy back its own bonds, Barclays said.

• That would reduce debt and help insulate Gazprom from Western sanctions against Russia.

High natural gas prices have put Gazprom on track for sky-high profits this year – and the state-run energy giant may use the extra cash to better insulate itself from Western sanctions, according to Barclays.

Natural gas prices have soared this year as Moscow choked off supply to Europe via key pipelines, including Nord Stream 1. Benchmark Dutch TTF natural gas futures have scored a series of records, hitting a high of 346 euros ($346) per megawatt hour in August.

Gazprom reported profits of 2.5 trillion rubles ($42 billion) in the first six months of this year, meaning it's already surpassed last year's $29 billion. Even conservative estimates suggest it has already made more than $70 billion from gas sales this year, according to Barclays.

"High gas prices have provided Gazprom with financial flexibility," said a team led by energy analyst Amarpreet Singh in a recent research note.

"On conservative estimates, Gazprom has already generated more revenue from gas sales in 2022 than in the whole of 2021, which was already the most profitable for the group in recent years."

Barclays said all signs point to the energy giant reinvesting the profits to reduce its foreign debts, which could make it more resilient to Western sanctions.

On August 11, Gazprom's finance arm requested changes to contracts for its dollar-denominated bonds, which the bank sees as a precursor to the company buying back its non-ruble debts.

"Gazprom is exploring a strategy to buy back its eurobond curve," Singh's team said. "It is seeking consent on a number of its bonds, which would allow it to buy back directly, avoiding issues caused by Russian capital controls and European sanctions."

The West has rushed to cut Moscow out of financial and energy markets since Vladimir Putin invaded Ukraine in February.

But by buying its debt from non-Russian bondholders, Gazprom would reduce its vulnerability to further US or European sanctions against Russia, according to Barclays.

"If successful in doing so, Gazprom would therefore appear relatively insulated from the lost revenue that would result should EU gas exports be cut completely," the analysts said.

"With fewer external liabilities, the company would clearly then be better able to withstand the risk of default should the EU or US retaliate with sanctions."