Expert: Moldova Will Have to Make Many Difficult Decisions on Gas

Anton SHVEC

The past gas crisis aftershocks create difficult tasks for the government both on the inner and outer perimeter. And no political events can rectify the failures in this direction.

The annual Moldovan-European Integration Forum, already the ninth in a row, despite the President Maia Sandu’s participation, was held as casually and discreetly as possible. References to the event of November 9 in Chisinau are extremely concise, overview. Traditionally, the most noticeable feature of the forum was the lack of its content. After all, apart from the standard affirmations about the aimlessly spent thirty previous years of independence, the need to fight corruption and ensure democracy with justice, the participants did not mention any useful initiatives or announcement. Thus, one of the foreign guests of the forum recalled that the European Union had allocated 60 million euros to Moldova for the reform of justice, to which Minister Sergiu Litvinenco replied with the wish for the judges to be “honest, fair and acting within the law”. Deputy Speaker of the Moldovan parliament Mihai Popsoi promised the earliest possible appointment of Vladislav Kulminski’s successor as deputy prime minister for reintegration. And Foreign Minister Nicu Popescu announced the launch of negotiations between Moldova and the EU on energy security issues in the near future. In fact, it is the topic of gas and electricity that determines the political well-being of the government and the country as a whole in recent years. Everyone, from consumers to foreign commentators, focuses their attention on it. The negotiations, which, according to Deputy Prime Minister Andrei Spinu, seem to have ended successfully, have difficult consequences for the country’s economy and politics. The government has announced a more than twofold increase in the cost of a cubic meter of gas for domestic consumers – up to 10.26 lei. Predictably, the decision was seriously criticized by the opposition. At a specially convened press conference, the Socialist Party representatives called the tariff increase the highest in the country’s history and demanded compensation for industrial enterprises. However, even taking government subsidies into account, the cost of a cubic meter of gas for household consumers in the next 5 months will depend on the level of consumption in the range of 6.8-11.08 lei. The Socialists, who had not faced such stories due to privileged relations with Moscow and Gazprom PJSC, predicted a surge of bankruptcies and staff cuts, an increase in the foodstuff cost and heating tariffs. Octavian Calmic, one of the directors of the National Energy Regulatory Agency, who is closely associated with the Democratic Party, added fuel to the fire. The former Deputy Minister of Economy predicted that ANRE will be forced to make many more difficult decisions. According to his prediction, the increase in gas prices will provoke an increase in the cost of heat, electricity and other utilities, including water and sewerage. The exponentially growing utility tariffs in the republic, where their average cost is already significantly higher than the regional average, will become a backbreaking burden for the population and industrial enterprises. Migration tendencies will increase, including the trend of temporary relocation to the left bank of the Dniester, as well as industrial production and business conditions will worsen. Affordable resources could provide an accelerated recovery of the Moldovan economy after the COVID-19 pandemic, but now the probability of favorable dynamics is low. Yesterday, the head of Moldovagaz JSC Vadim Ceban commented on the situation in detail. He started off by admitting that even the ANRE-set tariffs are not enough in case of negative price forecasts on world markets. Besides, the joint-stock company will have to reduce a number of employees. At the same time, Vadim Ceban promised not to dismiss technical specialists, letting go only of the administrative staff. Since even ultra-high tariffs will only allow Moldovagaz JSC to make ends meet, the head of the gas distribution company did not present any realistic scenario for debt repayment to Gazprom PJSC accumulated by the right bank. Its audit will be conducted throughout 2022, the issue will also be raised at a meeting of the Intergovernmental Commission on Trade and Economic Cooperation between Russia and Moldova. The Commission is unlikely to adopt a decision that would differ substantially from those recorded annually in the minutes of previous meetings. In addition, the level of competence and expertise in gas affairs of the current head of the Intergovernmental Commission from Moldova, Minister of Foreign Affairs and European Integration Nicu Popescu, leaves much to be desired. Therefore, the country will have to repay at least the body of the debt amounting to almost half a billion US dollars. Accordingly, until these funds are received, Russia is unlikely to agree on the JSC Moldovagaz restructuring with the transfer of its property to companies not affiliated with PJSC Gazprom, which will become an insurmountable obstacle to the implementation of the so-called “EU third energy package” in Moldova. As a result, the agenda for the energy security dialogue with the EU announced by Nicu Popescu really promises to be complex and tense. Moreover, Tiraspol also remains in the game and responds to the processes affecting its interests. Local media and pro-government telegram channels are actively replicating messages implying the possible increase in price for the Moldovan GRES electricity supply to the right bank of the Dniester or even its interruption in case of Chisinau’s intractability. The MGRES lever proved to be quite good during the gas negotiations between the government and the Russian side, therefore it will be used in the future as well. Especially considering the critical situation in the Ukrainian energy system and the inability to ensure a competitive offer for tender-based supply by companies from this country. It is obvious that Tiraspol and Inter RAO are seeking better financial conditions for the enterprise, as well as payment in hard convertible currency, since Transdniestria’s gold and foreign exchange reserves are depleted. On the other hand, the left bank of the Dniester reacts nervously to the statements by Vadim Ceban, who voiced an opinion about the need to transfer the seven-billion historical debt of Transdniestrian consumers to the balance of the Pridnestrovian enterprise Tiraspoltransgaz. Such an idea is unlikely to be understood by the left-bank authorities. At least until Tiraspol has the right to independently negotiate the supply of Russian gas, including its cost, as well as to dispose of the property of the gas transportation system, receiving corresponding payments for the transit of blue fuel. Thus, as a banal logic suggests, if Transdniestria can be a sovereign payer, then it should also be a sovereign recipient of payment. Therefore, if the Gavrilita-led government retains its current composition in the coming years, it will face much more complex politicized negotiations that would involve the PJSC Gazprom as well. In this regard, further events may develop only in two ways for Chisinau. Either the European Union provides more and more delays in the application of gas legislation adopted as part of the third energy package implementation. Or Brussels gets directly involved in talks with Russia and Transdniestria, provides Moldova with massive infrastructure and financial support, as well as expertise, seeking liberalization of the gas and energy market and Moldova’s connection to the relevant EU infrastructure. The first approach implies that Brussels will need a more pragmatic and less anti-Russian government in Chisinau, while the second approach implies a much more professional and active one. Anyway, the current Cabinet of Natalia Gavrilita has major problems.