Moldova Seizes Gazprom Property Using European Money

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Christian RUSSU
Problems for the Russian gas monopoly in the western direction arise not only in relations with the countries of the European Union. Apparently, expropriating or destroying Gazprom’s infrastructure abroad has also reached Moldova in recent months.
On Wednesday evening, the government adopted a series of regular measures to protect the country’s energy security. Among them, a loan to Moldovagaz JSC for paying off the debt for gas supplies to Gazprom PJSC. By the way, such allocations of funds this year have become routine. Our officials explain the need for emergency assistance to Moldovagaz and the spending of budget money by non-fulfilment of the company’s contractual obligations to its main shareholder. According to them, Moldovagaz must pay for supplies in the previous month and make an advance payment for half of the next by the 20th day of each month. When the authorities are reminded that an agreement with such obligations was signed with their direct participation in October 2021, we can hear references to a sharp increase in energy prices and accusations of Russia in blackmailing. However, in general, the contract, at least in terms of payments, was respected in fits and starts. Moldovagaz was allowed to defer the payment of tax and customs payments, was given funds for the purchase of additional volumes of gas to be pumped into gas storage facilities in Ukraine and Romania. Of course, the unpopular increase in tariffs for end consumers could not be avoided. However, they still did not cover the cost of paying for fuel from Gazprom, which cost $1,882.78 in September. Therefore, due to the refusal of the national regulator to increase the tariff in a timely manner and to the required level, our gas transportation company was doomed to constant cash gaps. The decision of the National Commission for Emergency Situations of October 19 is positioned in the same way. But with the proviso that a loan agreement with JSC Moldovagaz in the amount of one 1050 million lei will be concluded and secured by 100% of the company’s share in the authorized capital of Moldovatransgaz LLC and all movable property, assets that are part of the natural gas transmission network (transport networks, equipment, installations, etc.). It was further stated that the loan had to be repaid the next day, October 20, without prior approval from the board and/or the general meeting of the company. Its maturity date is May 1, 2023. If you look at the essence and terms of this decision, the government, until the last moment, was delaying providing Moldovagaz with funds to fulfill its contractual obligations. Then it offered the company a loan at the rate of the National Bank (21.5% per annum) with the condition of pledging the entire property of Moldovagaz, that is, in fact, all transit and distribution gas networks. This naturally threatens to take them away from the company, and, therefore, from Gazprom as the majority shareholder. To agree with this under normal conditions for the management of the enterprise is tantamount to suicide. To assume responsibility for this without the consent of the Supervisory Board seems reckless, but the chair of the board of Moldovagaz JSC, Vadim Ceban, called it the “most important decision” of the government, which can be regarded as an endorsement. At the same time, it is clearer than ever that the situation with chronic shortfalls in Moldovagaz will not change until May. Moreover, now the government has no particular interest in the proper repayment of the loan, and Moldovagaz will probably be brought to complete bankruptcy. However, formally, the conditions for the enslaving deal were summed up exactly as follows: either Moldovagaz takes a loan or does not pay Gazprom the amount under the contract, which already threatens to disrupt further gas supplies. The Russians simply did not have time to think, it is better to say, they were not asked at all. It remains an open question whether the management of our company knew about the “proposal” they were preparing and whether they informed the majority shareholders in advance. On the same day, a local Romanian-language TV channel, hardly watched in Moscow or St. Petersburg, broadcasted the prime minister who did not hesitate to boast of her government’s creativity. “If we are cut off from the gas, it should be absolutely clear that this is happening for political, not commercial reasons. We will sue if we are cut off. At the same time, if this loan is not repaid by May 1, 2023, we will take over the country’s gas transmission network.” In general, not all experts and politicians paid attention that, namely, the goal of seizing gas pipelines lies behind this combination. More often one could hear either approval or a remark about a flaw. Thus, the former President of Moldova, Igor Dodon, called “doubtful” the government’s attempts to “seize the infrastructure of a company where the state already owns more than 30% of the shares”, suggesting that “if the goal was to nationalize this company”, they could implement “a different procedure” . Remarkably, this time no one asked Gazprom to defer payments. The necessary money was found, and their source is easy to trace. During the first nine months of this year, Moldova received grants and loans to support the state budget 12 times more than in the same period last year, or over nine and a half billion lei. The quarterly dynamics of revenues is also indicative: 11 million lei in the first quarter, almost 3 billion in the second quarter, 6.77 billion lei in the third quarter. The European Commission allocated 2.46 billion lei during this period, almost two of which were grants. Other donors include the International Monetary Fund and the World Bank. Therefore, the money was there. The expenditure items could not but be discussed with Western partners. If we recall all the requirements that they put forward to Gazprom and its subsidiaries, the first thing to remember is the Third Energy Package. It provided for the obligation to divide gas enterprises in order to reduce the political influence of Gazprom in the EU countries and on its associate members, including Moldova. We should have implemented all the terms of the Third Energy Package back in June 2016. However, the deadlines for their execution by the secretariat of the EU Energy Community were postponed several times. Among the main reasons are the historical debts of gas companies both on the left and on the right bank of the Dniester. By the way, the settlement of the debt became one of the key points of the agreement signed by Andrey Spinu in St. Petersburg last October. According to it, before the end of the year, the parties were to sign an intergovernmental agreement just to prevent the division of Moldovagaz JSC until the problem with the debts of the right bank is resolved. Moldovagaz and Gazprom had to sign an agreement on their payment within a five-year period before May 1, and before that time, we undertook to conduct an audit. According to the protocol, until the end of 2022, no sanctions from the Moldovan authorities could be applied to Moldovagaz JSC. Now it is quite obvious that our leadership has not fulfilled its part of the obligations. The debt audit has just begun, and the signing of other documents, including an intergovernmental agreement on cooperation in the energy sector, is not even remembered. Our authorities deftly interpret the timid reminders of Russian colleagues about unfulfilled promises as nothing more than political blackmail. Now Chisinau will blackmail Moscow. For a loan of 1,050 billion lei (USD 54 million) from EU grants, which is actually less than the cost of a monthly gas supply (in September it was USD 90.46 million), the authorities effectively ensured that the gas transmission system was taken away from Gazprom by May next year. At the same time, in fact, the obligations on the division of Moldovagaz under the terms of the Third Energy Package to the European sponsors of this deal will be fulfilled. How Russia will respond to such a combination of the ruling party is unclear, but it is obvious that its positions in our country have been punched hard.