FRANKFURT--Germany's BASF SE, the world's largest chemical company by revenue, and Russia's OAO Gazprom have called off an asset-swap deal amid mounting political tensions between Russia and the West, BASF said Thursday.

The collapse of the deal means BASF now expects an only "slightly higher" increase in earnings before interest and taxes for 2014, rather than the "considerable rise" the company previously forecast, as it won't collect expected income from the transaction.

BASF had planned to divest itself of the gas trading and storage business of its wholly owned oil and gas subsidiary Wintershall AG as part of an asset exchange with Russian state gas group Gazprom that was scheduled to be completed by the end of this year. The trade, announced in November 2012, would have given Wintershall access to natural-gas fields in Siberia.

"Due to the current difficult political environment, BASF and Gazprom have decided not to complete the asset swap planned for the end of the year," a spokeswoman for BASF said.

Relations between Russia and the West have been increasingly strained since the Russian annexation of Ukraine's Crimea region last spring. Biting European and U.S. sanctions have squeezed the Russian economy and further isolated Moscow from the international community in recent months, while German companies like BASF have come under pressure from the German government to limit business ties with Russia.

The asset swap between BASF and Gazprom had been delayed for a roughly a year, but BASF Chief Executive Kurt Bock said as recently as early December that the deal was still on track to be completed. In October, Mr. Bock called the asset swap a "good and reasonable decision," suggesting the transaction had only been delayed by technical issues, rather than political concerns.

BASF's natural-gas trading business, largely housed under its Wingas GmbH division, will continue to operate as a 50-50 joint venture between Gazprom and Wintershall, BASF said.

As part of the swap, BASF would have divested itself of its share of that business to Gazprom. Gazprom would also have received a 50% share in BASF's wholly owned North Sea oil exploration and production unit Wintershall Noordzee. In return, Gazprom and Wintershall planned to jointly develop two blocks of the Urengoi natural gas field in western Siberia.

The combined activities of BASF's planned divestitures contributed around EUR12 billion ($15 billion) to sales and about EUR500 million to earnings before interest, taxes, depreciation and amortization in 2013, the company said. BASF said it would also book expenses resulting from the canceled deal of EUR113 million for 2013 and EUR211 million for 2014.

Wintershall, a major German crude oil and natural-gas producer, has been a "big strength of BASF," said Mike Smith, a vice president in the chemicals division of consulting firm IHS Global and a former BASF employee. For a company that produces an array of chemicals, having an oil and gas division like Wintershall is a "natural hedge against changes in energy prices," Mr. Smith said.

BASF's chemical business has been hurt by weakening demand for chemicals in Europe and a slowing global economy, forcing the company in October to lower its guidance for 2015. At that time, Mr. Bock cited the situation in Ukraine as one of the biggest global challenges facing the company, saying it had seen a 25% decline in its business in Ukraine and a negative impact on operations in Russia.

Russian President Vladimir Putin acknowledged Thursday during an annual news conference that Western sanctions were hurting the country's economy, while blaming Western powers for a growing divide between Russia and Europe.

Mr. Putin also cited external economic pressures, including a fall in global oil prices, that have caused the Russian ruble to collapse over the past week. The ruble has dropped almost 50% against the dollar this year.

Write to Christopher Alessi at christopher.alessi@wsj.com and Sarah Sloat at sarah.sloat@wsj.com

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