Gas Dimension of Regional Geopolitical Setup

Anton SHVETS

The US and German deal on the Russia’s Nord Stream 2 gas pipeline should preserve Ukraine's status as an important transit partner for the supply of natural gas to European countries. However, this approach contradicts the current trends in the gas and energy market of Moldova.

Despite the great concern of the Ukrainian leadership and local experts about the nature and content of the final consensus reached between Berlin and Washington regarding the Nord Stream 2 gas pipeline, this setup from the perspective of Ukraine's interests looks quite promising. Neither the United States nor Germany are seriously considering the possibility of suspending transit through its territory and are ready to impose sanctions on Russia if Moscow uses energy as an instrument of pressure on other countries. Moreover, Berlin and Washington are investing extra 1 billion US dollar in the development of Ukrainian renewable energy sources and the country's integration into the European energy system. The above amount is scanty both in terms of solving the issue of switch to an alternative fuel, and in terms of compensating for potentially lost revenues of Ukrainian companies and the budget. Position of Moscow is significantly more important, since it has clearly stated willingness not only to continue transit, but also to increase its volume, and the only term is the demand from the EU countries. This demand will largely be met through both Nord Streams and Turkish Stream. On the other hand, the Yamal-Europe gas pipeline running through Belarus and Poland has extremely dubious political prospects. Warsaw has raised the price of Russian gas transit several times, including this year. By 2022, it is planned to complete the construction of the Baltic Pipe gas pipeline, which will supply Poland with Norwegian natural gas produced in the North Sea, which, coupled with the launch of a modern LNG terminal in Swinoujscie, threatens to make the Yamal-Europe gas pipeline simply unnecessary. Anyway, Warsaw has repeatedly stated the appropriate political disposition to abandon Russian gas with the full support of the United States. In turn, this situation may have a favorable effect on the prospects for the Trans-Balkan gas pipeline and the Soyuz gas pipeline. Now the first of them is used exclusively for gas supply to Moldova, including Transdniestria. The second gas pipeline supplies Slovakia, Austria, the Czech Republic and Italy. After the launch of the Turkish Stream, transit capacity moved from the Trans-Balkan gas pipeline to the artery running along the bottom of the Black Sea. In particular, such EU countries as Romania, Bulgaria and Greece prefer this route for delivering Russian natural gas. In the future, Moldova also plans to receive reverse Russian gas from Romania. That’s why the Iasi-Ungheni-Chisinau gas pipeline is currently under construction. Taking into account the unblocking of about 60 million euro of direct financing to Moldova from the Romanian government, this project seems to become a priority geopolitical step of Maia Sandu and her Cabinet of Ministers. However, such an alignment could harm Russia's long-term energy interests in the region, arising many issues. First, the termination or significant reduction of transit through the territory of Ukraine may provoke the already announced sanctions by Germany and the United States. Secondly, the reverse from Romania to Moldova will challenge reliability of natural gas supply to Transdniestria, including the historical debt of Moldovagaz JSC to Gazprom PJSC for gas supplied to the left bank of the Dniester. As a matter of course, profitable operation of the Moldavskaya GRES in Kuchurgan, owned by Russian Inter RAO, as an electricity supplier to the right bank of the Dniester, will be also amiss. That is, while solving traditional gas issues with Kiev, Moscow risks damaging its own commercial interests in Moldova, as well as regional geopolitical status. An additional limiting factor is the requirements of the EU Third Energy Package, which is under progressive introduction by Moldova. The solutions under consideration assume that Gazprom will not directly or indirectly control Moldovagaz and Moldovantransgaz, as well as any possible gas traders operating in the country. This will greatly reduce the Russian gas monopoly’s space for maneuvering by subordinating the situation to market mechanisms as much as possible. As it stands, the transit possibilities of Ukraine, including the Trans-Balkan gas pipeline, may turn out to be the most attractive in terms of price-quality ratio, as well as in terms of long-term energy and geopolitical interests of Russia, including Transdniestria. The situation will largely depend on the demand for Russian gas in the Balkan countries, as well as in Bulgaria and Romania. Political stability in the above EU countries is in question. Bulgarian parliamentary elections have recently ended, and it is planned to shape a coalition of parties that have no experience in governing the state; the Romanian parliamentary coalition of the National Liberal Party, the Save Romania Union, the Freedom, Unity and Solidarity Party, and the Democratic Alliance of Hungarians in Romania is bursting at the seams. One way or another, there is no alternative to commercial negotiations and attempts to find mutually beneficial solutions, and the regional geopolitical picture will largely depend on their outcomes.