Moldova figured out how not to pay Russia for gas

Sergey Savchuk

Moldova, although it is one of the fifteen scattered fragments of the Soviet Union, is extremely rare in our news feeds. No wonder: a tiny country on the far southwestern edge of a former country with a steadily decreasing population of two and a half million people, a voluntary renunciation of nati-onal identity and recognition of itself as an unofficial part of Romania. The fighting in Transnistria has long ceased, the last sprouts of the still Soviet industry are desperately clinging to life.

Therefore, the news that a state of emergency has been declared in Moldova due to a critical shortage of natural gas sounded with a fresh frosty note against the background of usual topics. The situation is familiar and utterly reminiscent of another of our western neighbors, Ukraine.

Until September 30, a long-term contract for the supply of blue fuel, signed back in 2006, was in force between Russia and Moldova, and the cost of gas for Moldova was, on average, ridiculous in the light of current prices, $ 150 per thousand cubic meters. Chisinau, loyal to the pan-European fashion of abandoning long-term agreements and switching to spot trading, sabotaged the conclusion of a new contract by concluding a temporary agreement for a month. Under its terms, the price of natural gas was tied to the market, and this instantly led to the price tag rising to $ 790 in October. The Moldovan budget, the revenue part of which is $ 2.3 billion with expenditures of $ 3.1 billion, could not withstand such a jump.

With a total extremely modest gas consumption of 2.8 billion cubic meters, including Transnistria, whose debts are accounted for separately, the Moldovan budget, industry and the housing and communal services sector fell into an uncontrollable tailspin. Everything is so bad that the parliament, by its extraordinary decision, introduced a state of emergency throughout the country from October 22 to November 20. The official version says that this was done for a legal opportunity to urgently purchase energy resources abroad (read – at any price), but in practice, the population is urged to use gas as little as possible in everyday life.

Realizing the depth of the problem, the other day a working group arrived in Moscow, which, however, negotiated from a position that excludes the possibility of resolving the issue in principle. The position of Moldova is simple, unpretentious and arouses genuine admiration for its, shall we say, uncloudedness. Over the years, Chisinau has accumulated a huge (in comparison with the scale of consumption) debt to Russia. At the moment, the body of the debt exceeds $ 450 million, and together with the accrued interest, Moldova owes Gazprom more than $ 700 million. At the talks, Moscow, represented by Deputy Prime Minister Dmitry Kozak, offered the Moldovan side to extend the contract for gas supplies, moreover, Russia is even ready to provide a 25% discount.

All this is easily achievable if one simple condition is met: Moldova must pay off its existing debt. Note that the Russian side does not strangle the Moldovans, they should not return 700 million immediately, but over the next three years. In fact, the official Chisinau should show its goodwill and start at least partially paying money for the gas that has already been used for a long time.

But Maia Sandu’s team decided to play according to the Ukrainian scenario. Prime Minister Natalya Gavrilitsa spoke on the air of national television and said that her country does not recognize its debt to Russia, considers the dema-nds of the Russian side unacceptable and wants to conduct negotiations without any debt clauses.

Let us assume that Chisinau is trying to play the old Ukrainian card when it came to the proceedings in the Stockholm arbitration, which sided with Kiev. At the same time, the pro-European government of Moldova would not hurt to read about the other, shamefully hidden side of the gas medal. Yes, Gazprom did pay Ukraine a $ 2.9 billion forfeit, but as a result of negotiations in December 2019, Ukraine dropped any further claims against the Russian supplier. More-over, transit through Ukr-aine collapsed to a measly 40 billion cubic meters of gas per year, that is, three quarters of the UGTS’s trunk capacities are idle and decaying today without much hope for further use.

The same Ukraine, desperate to torpedo the construction and launch of Nord Stream 2 and sold part of its reserves during high prices, is now offering the “aggressor country” a 50% discount on transit. If only to pass the heating season and somehow replenish the budget. Moldova does not have this opportunity either.

Natural gas enters the country from only two sid-es. From the Ukrainian side of Ananyevo along two br-anches to Chisinau and R-ybnitsa and from the south from Romania. The main consumers of gas are generation facilities: Moldavska-ya GRES, Chisinau CHPP-1 and 2, as well as Balti thermal power plant. All of them are designed and use gas as the main fuel, with the possibility of transferring part of production to coal and fuel oil. It is these four stations that provide the lion’s share of the generated six terawatt-hours of national electricity.

The leadership of the Republic of Moldova cannot fail to know these figures and facts, as well as the fact that if they do not agree with Russia on gas supplies, this will lead not even to rolling blackouts, but to a nationwide collapse. But Chisinau continues to persist.

Perhaps the point is in the statements of neighboring Ukraine, which promised to support its southern neighbors in the fight against yet another invented Russian aggression.

Recall that in parallel with the trip to Moscow, the Moldovan delegation held talks with Ukraine, and the latter promised, if necessary, to support the Moldovans with the supply of additional gas. However, there are two subtle but critical details to pay attention to. First, it was not Naftogaz who promised to supply Moldova with gas, but the secretary of the National Security and Defense Council Alexei Danilov, that is, the person who is as far as possible from the energy sector. And the management of “Naftogaz” and the Ministry of Energy of Ukraine are silent on this matter. Secondly, even if we admit the possibility of such supplies, they will still not save anyone. During the negotiations, Mr. Danilov announced the figure of aid: 15 million cubic meters per month, that is, 180 million per year.

Statistics and mathematics leave no room for imagination. Moldova (excluding Transnistria) consumes 1.1 billion cubic meters of gas per year, that is, extremely unlikely Ukrainian supplies will cover only ten percent of the total demand. And here we come to the main thing.

Back in 2010, Moldova became a member of the European Energy Community, and a year earlier, due to another demarche of Ukraine, the country did not receive gas from Russia for almost two weeks. In 2014, Chisinau and Bucharest announced with pathos the construction of a branch of the Iasi-Ungheni gas pipeline, which, as was expected then, would completely free Moldova from dependence on Moscow by 2020.

The year is 2021, no miracle happened, but the situation has changed significantly. Over the past years, Ukraine’s role in gas transit has been steadily declining, but Turkey has decisively rushed into the supply market, coordinating the construction of the Turkish Stream and becoming the main gas hub in southern Europe.

Let’s look at the map again. A thread of the main gas pipeline from Turkey enters Bulgaria and then goes on to the border with Serbia. The border with Romania is not far away; it is only 250 kilometers from the main road. By the standards of projects like Power of Siberia, this is practically around the corner. That is, if necessary, the operators of the Turkish Stream can, in a short time, extend the interconnector to Romania in order to supply gas to Moldovans as well.

Yes, the same Russian gas, but with a Turkish mark-up – and again past Ukraine. Time will tell how long Chisinau will persist, endangering the well-being of almost 800 thousand of its own residents who receive gas from the Moldovagaz company. However, right now we can state the obvious: everyone who contacts Ukraine ends up losing. Both strategically and financially.

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