Russia's state-run gas giant Gazprom has reported a dramatic fall in annual profits, a result of the dramatic collapse in ruble.

Gazprom reported net profits of 159bn rubles ($3.1bn, £2bn) in 2014, a fall of 86% compared to the previous year, when it made a 1.14tn ruble profit.

Profits were almost $20bn down on the previous year but the company's underlying profitability looked strong, according to analysts.

The collapse in oil prices, which sparked the devaluation of the ruble, also played a role in the company's profit decline.

Moreover, the company is facing European sanctions on drilling but it said its operations have not been affected by Western measures.

The company has also been the subject of US sanctions, with its ability to reach US financial markets restricted. It has instead sought loans form Russian and European sources.

"The Group continues to assess and monitor the impact of the ongoing sanctions but currently does not believe they have a significant impact on the financial position and results of operations," Gazprom said in its results.

Gazprom was involved in a serious pricing dispute with Ukraine in 2014, which eventually resulted in the company cutting off gas supplies to the former Soviet state.

European challenge

Gazprom reported European gas demand decreased by 8.5% in the year, as the bloc accelerates efforts to diversify its energy dependence away from Moscow.

Moreover the European Union last week filed charges against the company over its behaviour in the bloc. The EU competition regulator field the charges that accuse the gas giant of abusing its dominant position in the European market.

Gazprom officials have denounced the charges as politically motivated.