Moldova’s Energy Sector to Face Volatility and Romania’s Merger

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Victor ENI
Attempts to urgently break up with the post-Soviet space will continue to rock the domestic energy sector. Meanwhile, full integration of Moldova and Romania’s energy systems remains a strategic task for the next decade
Europe’s energy sector remains in a zone of great volatility after the loosening of ties between the European Union and Russia in 2022 for well-known reasons. Amidst reduced consumption of energy from Russia, European officials remain optimistic, reporting the start of the heating season in the EU with a record fill level of underground storage facilities. Meanwhile, gas prices continue to vary and react to any, even insignificant factors. In addition, the European economy has not yet justified the optimism of the Brussels backstage in any way and has not increased its demand for energy resources, on the contrary, plunging deeper and deeper into recession. Business representatives explain this situation by the shortage of energy resources, as the US LNG, in fact, has provided only minimal but not enough support for the European industry. It seems that the EU has failed to find a profitable and stable alternative to Russian supplies, but continues “to put a good face on a bad game”. However, given the noticeable crisis in the economy, it is becoming increasingly difficult to hide the truth. As a result, there is a feeling that the only way out of this impasse is to restore long-term contracts with Moscow. Although such a move may seem unlikely in the current circumstances, this is surely a backup option in European chancelleries. For instance, the Czech Republic, one of the initiators of the ban on gas supplies from Russia to Europe and the introduction of an oil price ceiling, is no longer as principled as before and this autumn resumed imports of Russian energy resources. The Netherlands did the same, having started purchasing liquefied natural gas from Russia after a three-month break. At the same time, the Dutch authorities earlier reported that the government was working on a complete cancellation of its imports. However, as we can see, the political will to do so was quickly ran out. Just like in Europe, our officials are also diligently lulling the vigilance, saying that Moldova is much better prepared for the cold season than in previous years and is reliably protected from any surprises. The gas reserves allow to supply the country until the end of February, and if necessary, they can be replenished on the free market. In addition, the authorities are boasting about the contract with Moldavskaia GRES until the end of 2024, due to which, allegedly, we will have enough electricity at a good price. Despite all this reassurance, the situation in the energy sector does not allow citizens to feel as safe as they used to. The model of supplying the population with “geopolitically independent gas” (actually of Russian origin), the high cost of which is compensated by external loans that are later distributed in the form of social compensations, is too dubious and risky. It is obvious to everyone that this is a temporary scheme, and it is not surprising that, given the significant reduction in foreign aid in 2024, many citizens do not share the optimism of government officials at all. Especially since, according to the Ministry of Labor and Social Protection, more than 719,000 families requested appropriate compensation. Most of them were assigned a high, very high or extreme category of vulnerability. This indicates that the overwhelming majority of the country’s residents are not able to pay for gas at the current tariff and are at great risk if something breaks down in the described model - either the supply scheme or financing. Despite this, the authorities are carefully safeguarding their dubious energy construct, preventing any alternative gas supply, the cost of which could be lower than the price of the Spinu-Parlicov gas mixture. Let me remind you that the root of the problem goes back to the 2022-2023 heating season, when energy resources were purchased with an EBRD loan at an unreasonably expensive price and in a gigantic volume of 600 million cubic meters, twice the domestic winter consumption. Early this year, the market collapsed: in January-February, prices on international exchanges dropped to $450, and in the summer to $200-250. However, we continue to consume the “energy cocktail” of gas purchased in 2022 by Spinu and in 2023 by Parlicov, which does not allow us to lower tariffs. One way or another, the situation will change, as the European energy status quo that has emerged over the past year and a half has only slightly stabilized the situation. Nevertheless, the US still plays a decisive role in the energy situation inside Europe, including our country. It is no coincidence that the American ambassadors to Greece and Moldova, George Tsunis and Kent Logsdon, recently met with the management of Energocom JSC, confirming the continued support in ensuring energy security. In addition, the possibilities of the Trans-Balkan gas pipeline to diversify gas supplies to Moldova and Central Europe were discussed, taking into account the existing cooperation between Energocom JSC and the Greek company DEPA. The strategic task for the next decade is full integration of Moldova and Romania’s energy systems, or rather, the absorption of the Moldovan energy sector by our neighbors. It is expected that soon Chisinau and Bucharest will sign a memorandum of understanding on the implementation of projects of mutual connection of natural gas and electricity networks. In particular, they will increase the natural gas transmission capacity and expand the Iasi-Ungheni-Chisinau gas pipeline through the construction of the Chisinau Belt. In addition, because of the increased risks due to the situation in Ukraine, the draft memorandum envisages an increase in the storage capacity of gas purchased by Moldova on Romanian territory. The disconnection of our electricity system from Ukrainian and Russian-Transnistrian networks is also carefully prepared through the construction of the Suceava-Balti overhead power line and the interconnection line in Straseni with a power plant in Romania. The memorandum will enable the Romanian national electricity market operator OPCOM SA to become an operator of the Moldovan market, thus integrating it into the EU internal electricity market. Of course, the Kremlin is also thinking about pumping its energy influence and gas to Moldova. It is no coincidence that the head of Moldovagaz JSC, Vadim Ceban, started talking about potential purchases of Russian gas on the border between Ukraine and the Russian Federation and further transportation to Moldova if Kyiv does not extend the transit contract with Moscow. According to Ceban, another option to supply the Transnistrian region and the MoldGRES with gas remains only the Trans-Balkan gas pipeline, which carries Russian gas to the TurkStream. The overall picture does not inspire much optimism, only confirming the fears that the Moldovan energy sector will be quite rough in the medium term. Attempts to finally break away from the (post-)Soviet energy system seem to be going smoothly only at first glance. Full integration into the Romanian energy system and the loss of our country’s subjectivity in this most important strategic sector is likely to be followed by serious consequences for the state.