While Russian state corporations are losing ground in Moldova’s energy sector, large private companies from the Russian Federation, such as Lukoil, are also being forced to close down. At the same time, the authorities make it clear that they intend to “encourage” all large Russian businesses to leave the country
The loss by the Russian state monopolies of their dominant position in Moldova over the last year has become evident. At times even to the detriment of economic expediency, our authorities are radically renegotiating relations with Russian Gazprom and RAO UES, which owns the Kuchurgan power plant, reconstructing the energy supply schemes that have existed for decades. After all, achieving the strategic goal of reducing energy dependence on Russia automatically involves levelling off any Russian influence.
However, the Russian business presence in Moldova, including in the energy sector, is much more than just the giants mentioned above. For example, the leader in our market of wholesale and retail trade in oil products (gasoline, diesel fuel and liquefied gas) is the Russian company Lukoil that came to the country back in 1995. It has the largest network of 106 petrol stations, three tank farms and a liquefied gas terminal. Despite its Russian origins, the company is present only on the right bank of the Dniester.
In 2019-2020, the company confidently retained the top position in terms of oil product imports to Moldova. Thus, in 2020, it accounted for 41% of imported diesel fuel, 33% of gasoline supplies and a fifth of retail sales of all motor fuel. Lukoil-Moldova’s revenues reached almost 6 billion lei in 2021, a third more than in the previous year.
The company’s statistical results last year were no less impressive. Lukoil again became the leader in imports of oil products – almost half a million tons worth 9 billion lei. Generally, the last year was a record both in terms of volume (two and a half times more) and value of the imported oil products (one and a half billion USD). This is mainly due to active re-exports to Ukraine.
However, for the Russian company, its business in Europe, including Moldova, has become a burden. In spite of Lukoil’s management being the first among Russia’s big businesses to call for an end to the invasion of Ukraine in March 2022, the EU’s anti-Russian sanctions have directly affected the operations of its subsidiaries on the continent.
In this regard, our country is just a branch of Lukoil’s business in Romania, where it has a network of 315 petrol stations, its own oil refinery in Ploiesti and a share in a joint project with Romgaz to develop the Trident (EX-30) gas field in the Black Sea with reserves of 30 billion cubic meters.
Since 2014, after the annexation of Crimea, Lukoil has had occasional problems with Romanian authorities. As part of an investigation into money laundering and tax evasion, Petrotel Lukoil S.A. was searched, then the court seized its property and accounts worth €2 billion. Failures have also haunted Lukoil during the development of gas fields on the Romanian shelf, where losses from unsuccessful drilling amounted to more than $300 million. Alongside this, the Romanian authorities changed the law on offshore gas production in 2018, introducing a progressive tax rate on oil and gas company revenues. In November 2022, a Russian company officially notified Romanian authorities of its intention to withdraw from the project. However, changes in Romanian legislation forced US ExxonMobil to leave the country as well.
Last year, Lukoil was caught between a hammer and anvil. On the one hand, following instructions from the EU governments, its subsidiaries in Bulgaria and Romania, as well as in Moldova, became one of the largest suppliers of fuel to Ukraine. On the other hand, such assistance in supporting the Armed Forces of Ukraine by Russian business could hardly find approval in the Kremlin.
The EU oil embargo imposed against Russia on December 5, Lukoil was forced to completely stop supplying its own crude, and refocused on Kazakhstan oil. As of 2023, Lukoil has secured a contract with the state oil terminal operator in the port of Constanta to transport oil to its Ploiesti refinery. However, all these efforts are probably only to prevent the depreciation of its Romanian assets during negotiations with potential buyers, including the Anglo-Dutch company Shell and Kazakh KazMunayGaz (KMG). The latter owns networks of Rompetrol branded filling stations in Romania and Moldova. By the way, last May Shell sold its Russian assets to Lukoil (114 filling stations in central and northwestern Russia and a refinery in Torzhok).
As for the Kazakh company, it has already set up an energy investment fund (FIEKR) with the Romanian government, which is used to finance building projects of new Rompetrol gas stations. Apart from Rompetrol, this partnership includes OTP Bank, which is also present in Moldova. This state of affairs greatly simplifies the simultaneous transfer of Romanian and Moldovan assets of Lukoil. According to unofficial information leaked to the media, the deal might be curtailed as early as this year.
Of course, not much depends on the Moldovan authorities in this particular case. Lukoil’s impending departure from the country is primarily caused by the EU sanctions and their enforcement by the Romanian government. If Romania, like Bulgaria, postponed the embargo on sea supplies of Russian oil, the Russian company would probably see the prospects of remaining in the Romanian and Moldovan markets. Although it is clear that our authorities, for the self-praising purposes, are now trying to underscore their aid in ousting big Russian businesses from the region.
The information campaign against the Yandex group, another Russia-based major business, is illustrative. Immediately after new Minister of Economy Dumitru Alaiba’s trip to the Davos Forum and the announcement that Uber would soon come to the country, the Competition Council initiated an audit of the company that runs the Yandex Go and Yandex Pro apps for alleged abuse of dominant position in the service market. Meanwhile, the authorities themselves say this is only the first investigation concerning digital platforms and their use for unfair competition, which confirms that actions against Yandex Russia are politically motivated.
Thus, this year we can safely expect that our authorities, following the Russian-business-is-toxic trend set in the West, will in every possible way demonstrate their struggle against Russian investments, that have supported the country’s economy for decades. However, as I said earlier, today the economic logic completely loses out to the political one. And this not for the first time.