The Government in the Republic of Moldova has been accused of having given in, once again, to the blackmail of Russia and Transnistria when it accepted to deliver all Russian gas imports to Tiraspol in exchange for electricity. As a matter of fact, for the time being Chișinău authorities don’t have too many alternatives at their disposal in terms of electricity and natural gas supplies, and any projects already launched with a view to diversifying Moldova’s energy sources need time to be implemented.
Despite contractual terms, Gazprom cut back on gas deliveries to the Republic of Moldova
The start of the energy crisis in the Republic of Moldova coincided with the change of regime in Chișinău and the victory of the pro-European Action and Solidarity Party in the July 2021 election.
In August, a new government was sworn in. Shortly afterwards, one of the priorities of the new government was to renew the contract with the Russian energy giant Gazprom, since the existing contract at the time was bound to expire on September 30, 2021.
Negotiations for the new contract overlapped with a difficult period for the entire Europe. Russia started to exert pressure on Europe’s energy system, thus paving the way for its large-scale invasion of Ukraine and for the use of natural gas as a weapon against the West.
In the case of the Republic of Moldova, the Russian energy company refused to automatically extend the contract upon reaching its expiry date, which was standard practice up to that point. Gazprom also limited the volume of gas deliveries to 67% of the Republic of Moldova’s demand. This was exactly tantamount to the typical volume of gas needed by Transnistria, a separatist region controlled by the Kremlin which is home to a couple of large energy-hungry enterprises. Among them, the Râbnița Metallurgical Plant and the power plant in Cuciurgan. At the same time, the Russian energy giant upped the price for natural gas from 550 USD in September last year, to 790 USD, which is approximately four times compared to value at the start of 2021.
It appears the new government in Chișinău did not see that coming. It did, however, manage to take swift action in order to come up with ways of curbing the country’s reliance on Russian gas imports. At the time, Gazprom was Moldova’s only natural gas supplier.
Chișinău soon started buying natural gas on international markets. However, due to Russia’s actions, by that time the price had increased considerably at global level. On October 22, the Republic of Moldova declared a state of emergency in the field of energy, allowing the country to simplify and streamline judicial provisions for the purchase of natural gas from sources other than Gazprom. In fact, this was the first time when a third of Moldova’s gas input originated from a source other than Russia.
At the end of the same month, Moldova’s Minister for Infrastructure and Regional Development, Andrei Spânu, and Gazprom’s executive director, Alexey Miller, signed a new five-year contract for the delivery of natural gas. Payments would be made based on a formula factoring in stock market prices for natural gas, as well as the price of oil products. The formula ensured the lowest price in winter time and a higher one during the summer, when natural gas consumption drops significantly. Andrei Spânu labeled the contract as a success for the government, although some experts and the opposition criticized the move, saying the authorities could have obtained a better price. Nevertheless, no other solution was in sight at the time, because the energy crisis had started to get worse, and the price for natural gas was sky-rocketing on international markets.
Despite this contract, Gazprom continued to threaten to cease gas deliveries to Chișinău at the slightest delay in payments. On October 1, 2022, violating the terms of the contract, Gazprom again reduced gas deliveries to Moldova by approximately 30%, just as it had done a year before, blaming Ukraine for failing to ensure the transport of the entire volume of gas.
This time around, however, Chișinău was more adamant, stating that the region of Transnistria will get merely a third of the 5.7 million cubic meters of natural gas delivered by Gazprom on a daily basis.
The decision appeared to cause serious problems for the separatist administration in Tiraspol. It should be mentioned that, starting 2005, Transnistria has stopped paying for its natural gas consumption, and the delivery of this resource became a way of funding the regime of this breakaway region: Russia delivered gas for free to Tiraspol, which was used to generate electricity at the Cuciurgan power plant (owned by Russian company RAO EES) and subsequently sold to the territory controlled by Chișinău authorities. After Chișinău refused to deliver the entire quantity of gas to the region of Transnistria, where Russia’s influence is overwhelming, heat distribution was limited to a few hours in the mornings and evenings in Tiraspol, whereas the schedule of trolleybuses was also restricted to mornings and evenings.
The Republic of Moldova’s current energy infrastructure makes the country dependent on the region of Transnistria
One major obstacle to overcoming the energy crisis in the Republic of Moldova is the existing infrastructure, which by and large dates back to the Soviet era. Whereas in terms of natural gas, Chișinău succeeded in securing an alternative source, namely the Iași-Ungheni-Chișinău pipeline, rendered fully operational in 2021, which recently imported the first volume of natural gas from the trans-Balkan network, electricity is an entirely different matter. Moldova’s electricity grid has not been modernized since the Soviet period and is still connected to the one in Ukraine. Of the few high-voltage lines linking the Republic of Moldova to Ukraine, only one is directly connected to the territory controlled by Chișinău authorities, the others cross Transnistria. Similarly, the only line linking Moldova to Romania, in Isaccea, first crosses the territory of Ukraine, then the breakaway region of Transnistria, from where the electricity is then redirected to the left bank of the Dniester.
Therefore, the Republic of Moldova remains extremely vulnerable in terms of electricity supplies, and ultimately relies on the separatist regime in Tiraspol, which at any time can suspend deliveries to the territory under Chișinău’s control.
To remedy the situation, the government in Chișinău signed a contract for the construction of a 400 kV high-voltage line that would link Isaccea to Vulcănești and then Chișinău, bypassing Ukraine and the region of Transnistria. The public tender for the construction of this line was won by a company from India, which many pundits consider to have been a mistake for Chișinău authorities, given that the company in question has a shady reputation, and that another company from Romania also participated in the tender, putting in a slightly higher offer, exceeding the Indian company’s bid by a few tens of thousands of dollars. The authorities claim legal provisions forced them to choose the company from India, since its bid was the lowest in the tender. Some analysts believe, however, that the Government should have opted for the Romanian company, because it would have been easier to convince to speed up the construction process, unlike the Indian company.
Andrei Spânu recently announced that the technical project for the new line is 80% complete, and construction works per se are expected to kick off next spring.
Until the new line is rendered operational, the Republic of Moldova remains reliant on Tiraspol’s goodwill, as the separatist regime can cease electricity deliveries from the power plant in Cuciurgan at any given moment.
Evidence of that is last month’s energy crisis. In mid-October, the plant in Cuciurgan, which at the time supplied 70% of Moldova’s energy input, announced a 27% drop in the volume of electricity delivered to Chișinău due to a shortage of natural gas. In November, the plant stopped deliveries altogether. One may assume this was an attempt by the Kremlin to pile up more pressure on the current administration in Chișinău, prompting it to soften the tone in relations with Russia and dial back on its European integration aspirations. All this time, authorities in Chișinău had to buy electricity from Romania and from thermal-electric power plants in Chișinău and Băți (which cover a maximum of 17% of Moldova’s total electricity demand). Most of the electricity bought from Romania was purchased on the stock market as a matter of urgency, at times prices exceeding 400 and even 600 EUR per 1mgW/h. A price that very few consumers in the Republic of Moldova could afford, Minister Andrei Spânu claimed.
Has Moldova given in to pressure from the Kremlin and Tiraspol or made a necessary compromise?
The solution chosen by the government in Chișinău was provided by the same power plant in Cuciurgan. As pressure continued to build up on both sides of the Dniester for a whole month (Chișinău limited the volume of gas delivered to Transnistria, whereas Tiraspol stopped delivering electricity to Chișinău), it appears a compromise has been reached. Minister Andrei Spânu announced on December 3 the signing of an agreement with the power plant in Cuciurgan which will cover 53% of Moldova’s electricity input for the month of December, at a price of 73 USD per 1mgW/h. The remaining 47% will be bought from Romania. The agreement in question might be extended to cover March-January, 2023. In exchange, Chișinău will be delivering to Tiraspol the entire volume of natural gas bought from Gazprom. According to Andrei Spânu, the right bank will be using the stockpile of natural gas from Romania and Ukraine to cover domestic consumption for two months this upcoming winter, while the rest of the gas is expected to be purchased on the international markets. Minister Spânu says that, at any rate, this agreement is more economically lucrative than the current policy of purchasing most of the electricity from Romania as a matter of extreme urgency.
Once the deal was struck, several analysts and political opponents have accused the Moldovan government of making concessions to the Kremlin and Tiraspol. They insist that Government officials should have amped up the pressure on Tiraspol and stopped delivering gas altogether.
Other experts say this is a reasonable compromise that will allow Chișinău to avoid mass-disconnections from the country’s electricity grid. We should see the full picture, also from the perspective of the critical situation at regional level in terms of energy supplies. Secondly, we should neither overlook how the emergency energy Moldova is purchasing might affect the economy and the performance of Moldova as a state, experts say. Economic journalist Ion Preașcă says that, if the situation had remained unchanged, energy bills would have continued to soar, which would have inevitably sparked social unrest.
In turn, energy expert Ion Muntean pointed out that this agreement also helps ease pressure on Romania, which had to cover 90% of the Republic of Moldova’s electricity demand for a whole month.
“We need to understand that Romania itself is currently importing electricity, particularly at peak hours, and we have so far benefited and continue to receive electricity from Romania. But the situation will get even more complicated as consumption and the energy demand at European level will go up, including in Moldova”, Ion Muntean argued.
The Moldovan expert believes that, come spring, the situation will improve on the regional market, and energy prices will go down, thus allowing the Moldovan government to revert to small deliveries of gas to the region of Transnistria.
Maia Sandu is keen on restructuring Moldova’s energy sector
Beyond all that, the contract signed with the power plant in Cuciurgan, and particularly the way the contract was announced – on a Saturday evening, on the Telegram account of Minister Andrei Spânu, followed by a day and a half of complete silence – seem to have disgruntled president Maia Sandu. On a visit to the United States, the president published on her Facebook account a message asking the government to provide swift and clear explanations regarding the latest developments in the energy field.
“Energy security is a key constituent of the country’s security, and each citizen has a right to be informed about decisions taken in this field. The government must explain clearly and without delay every action undertaken to ensure electricity and natural gas supplies for December and the upcoming period, so that society should understand the circumstances and conditions that justified taking these decisions. The situation in the energy sector is getting more intricate, and the need to expedite the elaboration of medium and long-term solutions once again confirms the need to restructure the activity of the government in this sector […] I call on the government to submit solutions to restructure the energy sector in due time. The government must channel additional efforts towards the energy sector”, Maia Sandu’s message reads.
In the upcoming period, we may likely see what Maia Sandu meant by “restructuring the activity of the government”.
Until then, it is clear the Republic of Moldova remains reliant on Tiraspol and by extension on the Kremlin in terms of electricity supplies, although the country is now less dependent than ever on Russian gas imports, since it succeeded in stockpiling enough gas in advance and securing access to international markets.