Gas Dilemmas of Moldovan Authorities

Victor ENI

The ruling regime faces a difficult dilemma: stick to its plan to lower the gas tariff before the local elections but tolerate more and more resounding accusations of blatant theft from the population and businesses, or lower the price now. We see a halfway solution so far.

The unforgettable leader of the Our Party, Renato Usatii, again appeared in the national media landscape, accusing the authorities of condoning the “great robbery of people”, arranged through various schemes of purchase and supply of gas in Moldova. According to Usatii, today more than 70 large companies buy gas at 13 lei per cubic meter, while other businessmen and individuals pay more than 29 lei; this resulted in robbing the population of over 4 billion lei from February to April. Despite the politician’s flamboyance and propensity to raise tempest in a teapot, such statements cannot fail to arouse public interest, even if the pro-power media have been diligently avoiding the topic for two weeks. Usatii’s accusations have resonated with the public and businesses, because since last fall, the authorities have been urging people to pay some of Europe’s highest tariffs – gritting their teeth and tightening their belts – in order not to be dependent on the Kremlin. Actually, most of people and entrepreneurs are discriminated, and this is not a bad reason to express their discontent, which will be worse than the Sor Party protests. To prevent the situation from spiraling out of control, the government had to respond at the level of the prime minister, who promised to look into it and take action. It should be noted that about a month ago, Dorin Recean had already said that the gas tariff would be reduced before the fall, although prices on international exchanges had been falling all spring and by May had dropped to the minimum of the profitability of gas production. But the authorities persuaded us that it was impossible to purchase cheap seasonal gas and that there was no alternative to consuming expensive gas. Apparently, the public appearance of the former Balti mayor on the very eve of the “Bulboaca Summit” was a big surprise. After all, according to experts, the remaining expensive winter gas at the current tariff of 29 lei was planned to be quietly sold for several months and only closer to the local elections would the ruling party make a “grand tariff gesture”. However, circumstances forced us to speed things up and already on June 5 Moldovagaz applied to the National Agency for Energy Regulation of the Republic of Moldova (ANRE) to reduce the gas tariff to 18 lei per cubic meter (which is still too much, taking into account the situation on international markets). In order to ensure the technical possibility, the government decided to increase the norm of mandatory gas reserves twice: from 22.8 million to 45.6 million cubic meters. Energy Minister Victor Parlicov explained this by the need to have an urgent opportunity to intervene in case of balancing the system. But, most likely, such a measure is related to the official intention to hold in reserve the expensive energy resources purchased at the end of last year and the beginning of this year, and to proceed with the purchase of cheaper gas, which is now in abundance on the market. This, in turn, will allow the population to sell the “gas mix” of expensive and cheap gas at a lower tariff. We should not exclude that the media attack is the result of an ongoing struggle in the depths of Moldovan power between various groups of influence. In this case, former Deputy Prime Minister Andrei Spinu, who has long complained of harassment by the special services and investigative bodies, has been directly targeted. As they say, there is no smoke without fire, and, given the weakness of Moldovan officials to large public procurements (especially, such as gas), we cannot exclude that someone is very well “warmed” to this end. With all the risks, the current Prime Minister Dorin Recean may become one of the beneficiaries of the current situation, which will allow him to earn some political points by softening the tariff burden on the population in the first 100 days of his team. Also Recean would profit from a possible reduction in the influence of Spinu and businesses associated with him, which, judging by the leaks from Renato Usatii, had badly screwed the ruling party and the president, who convinced people of the only possible formula: expensive gas + financial compensation. At the same time, the current decision to lower the tariff may well be temporary because of the unstable conditions on international markets, which are very sensitive to rapidly changing political circumstances. According to reports, the state company Energocom has plans to buy gas at more favorable prices at the expense of 200 million euros provided by European partners (a grant of 100 million euros from the Norwegian government and an additional EBRD loan of a similar amount). However, new recommendations of the European Commission in late May called on the EU countries to be ready for a complete cessation of Russian gas supplies, not to mention favorable/unfavorable prices. In a relatively favorable scenario, the EU states will only be able to receive Russian fuel via Ukraine and the Turkish Stream pipeline, but even in this case there are many risks that could lead to an additional reduction in supply volumes. The situation is complicated by the fact that the current contract for the transit of Russian gas through Ukraine is valid until the end of 2024, and no one can predict how Kyiv will behave in this situation. If there is no certainty in the Russian-Ukrainian conflict by next year, the chances of extending this contract will be low. It cannot be ruled out that Ukraine will try to use the financial and energy interdependence of Europe and Russia to obtain concessions from each of the parties. In addition, the growing uncertainty over the transit contract is likely to provoke another surge in gas prices as early as this autumn. Against this background, experts have again started talking about the fact that under such conditions the Transnistrian region may be deprived of “free’ Russian gas, while the Moldavskaya GRES may be deprived of raw materials for generating electricity, which supply would make the right bank dependent for at least a couple of years. On the one hand, the complete gas gap theoretically creates reintegration prerequisites, but on the other hand, it generates serious problems and challenges, which Chisinau never had to face during all the three decades of independence. We are talking about the need to find significant funds for the purchase of additional amounts of gas for both domestic and industrial consumption on the left bank of Dniester River in order to prevent a regional social and economic disaster. The appearance of Renato Usatogo on the eve of the EPC Summit is not accidental. Some will say that it was the official start of the Our Party electoral campaign, some will call it an attempt to decree the current authorities, and some will connect such a move to the desire to show foreign guests the real state of affairs in Moldova on the example of the gas market. All these versions are viable, but in the murky waters of the Moldavian politics, we can quite clearly see the corruption in the higher echelons of power, the inability and unwillingness to provide a stable supply of energy resources at affordable prices, and the absolute uncertainty and unpredictability for people and businesses.