Moldova Braces for a New Energy Shock?

While officials talk about “energy independence”, true situation in the industry is rapidly deteriorating. The emergency meeting of the National Security Council is an indirect admission that the country is once again approaching a dangerous threshold

While officials cheerfully report on successes in the energy sector, it appears that a serious crisis is quietly brewing. And at any moment, it could deal another blow to citizens amid the country’s already dire socioeconomic situation. A peculiar acknowledgment of these bleak prospects is today’s convening by Maia Sandu of the National Security Council (NSC) for an emergency meeting specifically on energy. And when the authorities themselves suddenly take notice of the situation in a strategic sector, it usually means one thing: things there are far worse than one can imagine. Formally, the stated reason is global instability in energy markets and regional tensions in the Middle East. But it seems more likely that behind closed doors the discussion centered on very specific risks that the authorities are no longer able to ignore, even though they are not prepared to openly acknowledge them to the public. Despite the fact that the Ministry of Energy regularly reports on all sorts of initiatives and assures the public of fuel reserves and the diversification of energy supplies, Minister Junghietu has been literally crisscrossing capitals and international forums for several months in search of new routes and sources of supply. Azerbaijan is being considered as a potential partner for natural gas imports; the Vertical Gas Corridor is under discussion; options for participation in the “Caspian-Black Sea-Europe” energy corridor is being explored, and so on. All of this resembles the work of a “fire brigade” scrambling to find ways to prevent some kind of adverse scenario. The main problem is that the country’s current energy security framework, which the ruling party has shaped over the past five years, is largely based on temporary and often stopgap measures. After abandoning Russian gas and excluding Cuciurgan Power Plant from the list of electricity suppliers, we were long told that Moldova was entering a new era of “energy independence”. However, just the day before, as if on cue, another accident occurred on the Isaccea-Vulcanesti and Vulcanesti-Cuciurgan Power Plant lines. It would seem nothing out of the ordinary, no one even launched drones; it was just a bit of wind and rain, yet everything was once again in a state of emergency. It seems that only weather conditions can clearly demonstrate that the entire infrastructure running from Romania through Ukraine and Moldova along old Soviet lines is in a state of technical wear and tear that borders on the critical. It is compounded by periodic overloads in the Romanian power grid, as well as constant attacks on generation and transmission facilities in Ukraine. The grids are overloaded and worn out on both sides of the border, but PAS is doing everything in its power to integrate Moldova into this extremely unstable energy landscape to serve imaginary political goals. Particularly telling in this regard is the story of the construction of the new Vulcanesti-Chisinau power line, which was intended to eliminate the country’s reliance on the Moldovan-Russian power grid (and, along with it, Tiraspol’s influence over electricity imports from Romania). The project was presented as virtually the cornerstone of the country’s energy future. However, the initial deadlines for construction and commissioning have already been delayed by six months. And even if the line is completed on time, judging by the periodic outages on the older sections of the main grid, it will not fundamentally change the situation. The National Security Council meeting likely addressed issues related to energy supplies to Transnistria. Given the significant political changes in Hungary, initial concerns arose regarding a possible termination of existing contracts for gas supplies to the region. However, following a series of statements by the new Hungarian leader regarding the availability of energy resources from Russia and the inevitability of Europe’s return to purchasing Russian gas, the risk of another crisis on the left bank of the Dniester has presumably decreased. Another important factor is that in recent years, Moldova has become deeply integrated into the European energy market, and as a result, it is experiencing all the fluctuations that occur there. And the outlook for the European energy sector is, at the very least, alarming. According to Gas Infrastructure Europe, underground gas storage facilities on the continent are only 35% full (compared to a seasonal average of about 50%), while the target level by the start of winter is 90%. To overcome such a serious shortfall amid limited pipeline gas volumes, EU countries will require enormous resources. If the problem cannot be resolved, Moldova will clearly not be among the first to receive the necessary supplies, especially at a high price amid a shortage. Compounding all of this is the situation surrounding the Strait of Hormuz, through which about one-fifth of the world’s oil supplies and a significant portion of LNG pass. The Iran-U.S. standoff has turned this strategic route into a constant source of instability. If this crisis continues to drag on, rising oil prices will inevitably be followed by increases in gas, electricity, and the full range of related tariffs on various product groups. For our country, which purchases all its energy resources on the open market and without long-term contracts, the outlook looks, to put it mildly, ominous. Incidentally, one of the “firm” contracts, the agreement with Russia’s Gazprom, is technically still in effect until this fall, but we are confident that the authorities will refuse to renew it, aligning themselves with Brussels’ position. Historians will likely be the ones to assess how economically rational is this. But for now, the main question is how much our political principled stance will cost us next winter and to what extent the European Commission will be willing to compensate for it. It is clear that if Europe itself faces an acute gas shortage and prices skyrocket, Moldova will be competing for spot market volumes alongside Germany, France, Italy, and other European countries but without their budgetary resources or financial resilience. It would be presumptuous to count on Brussels to once again come to the rescue of Moldova’s energy balance. Undoubtedly, we have already weathered energy crises in recent years. But the current situation, according to forecasts, differs significantly as there is much less room for maneuver. This impression is based on several indicators: the public’s resilience has been virtually exhausted, businesses have only partially adapted to volatility in the energy sector, the state budget is burdened by a deficit, and foreign aid has been significantly reduced. Sandu and PAS have been aware of this situation for some time, which explains the need for the National Security Council meeting, diplomatic efforts, attempts to accelerate infrastructure projects, build up reserve capacity, and, of course, cautious signals about “thorough preparations” for next winter. But there is no time left to correct systemic failures. So now the ruling party’s main goal will be to at least prevent catastrophic scenarios and find ways to mitigate potential energy shocks for the population, which is practically unprepared for them. Well, the coming months will surely plunge us all into a “summer hibernation,” with assurances that “everything is under control” and so on – all to prevent panic and avoid a sharp drop in PAS’s ratings ahead of the new electoral cycle.