Expert: Moldova Heads into Winter Dangerously Exposed

For several years, citizens were told that high energy prices were a temporary price to pay for the transition to “energy independence”, while European integration would soon bring the long-awaited stability. In reality, however, rising tariffs have become a permanent fixture, while “stability” is once again being secured through a state of emergency, external borrowing to fund compensation payments, and hopes for a mild winter

Yesterday’s meeting of the National Security Council on the energy situation provided eloquent evidence that the situation is approaching a critical point. Following the discussions, Maia Sandu announced the need to declare a state of emergency in two areas at once: energy and hydrology. It appears that the standard mechanisms of governance are no longer sufficient, and the government once again needs emergency tools to manage the situation manually. In broader terms, the picture does indeed look alarming. The European benchmark price for natural gas has exceeded $1,000 per thousand cubic meters, more than two and a half times higher than a year ago. Diesel fuel on the international market has risen above $1,500 per ton, while prices at our filling stations are steadily approaching the psychological threshold of 40 lei per liter. At the same time, hydropower generation is declining due to the drought, while the average inflow into the Novodnestrovsk Reservoir during the first twenty days of September was just 23 cubic meters per second, compared with a seasonal norm of 100-120. But the most alarming development is the authorities’ de facto admission that the problem is no longer merely the cost of energy resources, but also their physical availability on the market. The expanding global crisis has hit dozens of countries, but few are facing it from a position as unprepared and fragile as Moldova. The government openly admits that it has absolutely no contingency plans and will, as they say, deal with the situation as it arises. After so many years of talk about “energy independence”, our country once again finds itself among the most vulnerable states in the region. A continued blockade of the Strait of Hormuz and further escalation around Bab el-Mandeb are likely to disrupt the established supply routes for Middle Eastern energy resources even further, while European gas storage facilities are already 16% below the five-year average level. For Moldova, which has no domestic storage capacity and is critically dependent on imported energy resources, this means not only a high probability of a price shock, but also a real threat of fuel shortages at the height of the heating season. The situation in the electricity sector is hardly any better following the August shutdown of both units at Romania’s Cernavoda nuclear power plant due to the Danube reaching record-low water levels. As a result, generating capacity equivalent to around 20% of Romania’s electricity output was taken offline. At the height of the shortfall, Romania’s supplies covered up to 60% of Moldova’s electricity deficit. Consequently, any disruption within Romania’s own system immediately turned into a threat for Moldova of power outages or emergency purchases at emergency, that is, exorbitant, prices. All of this is a clear illustration of just how conditional energy security becomes when it is built on the goodwill and available spare capacity of a single source. Back in March, the government of Alexandru Munteanu declared a state of emergency after the Isaccea-Vulcanesti power line was damaged as a result of strikes on Ukrainian infrastructure. As is well known, Moldova’s main electricity supply route runs from Romania, but a substantial part of it passes through Ukrainian territory. The result is an almost caricature-like situation: while PAS is politically declaring that we are all part of a single European energy space, physically a key share of our energy supply still depends on whether a particular power line survives in an area exposed to military risks. Abandoning the former energy links with Russia could, in itself, be regarded as a partially rational objective, since supplies from Russia were gradually reduced and then stopped altogether, although, it must be acknowledged, not without the assistance of our own authorities. After that, the previous arrangement, under which cheap gas was supplied to the Transnistrian region and the MoldGRES provided electricity to the right bank, also became a thing of the past. Is it possible to build a new combined model that would at least ensure stable electricity supplies from the left bank of the Dniester for the next six months? In our view, there are some prospects. However, it appears that Chisinau is not yet prepared even to theoretically consider the possibility of returning to any form of energy cooperation with Tiraspol. Meanwhile, the strategic Vulcanesti-Chisinau power line, intended to reduce dependence on the route running through the Transnistrian region, has still not been commissioned. The line itself has been completed, but a transformer defect at the Chisinau substation derailed the final launch, and the authorities are still unable to provide a firm completion date. Even the official commissioning of the project, however, would do nothing to resolve the strategic problem of a potential electricity shortage on Romania’s power market. The main reassuring argument put forward by our government is that Moldova has already secured three quarters of its needs for the entire gas year. However, the existence of such a safety mechanism creates, to put it mildly, an exaggerated sense of certainty. The forward contracts that have been signed use a formula tied to the TTF index on the eve of the delivery month. In other words, Energocom has secured the volume, but certainly not the final price of the gas. The state-owned company’s management has openly acknowledged that the cost will be calculated later based on the market index, meaning that any spike in quotations will inevitably feed through into future tariffs. It is important to understand that the contract signed by Energocom merely reduces the risk that there will be no available gas volumes on the market when the time comes for delivery. It does not, however, protect Moldova from exorbitant resource costs, logistical disruptions, or entirely plausible force majeure events. Against this backdrop, Vasile Tofan’s government is entering its third month in office with energy, economic, and social risks converging into a single knot, while the ruling regime is weakening on all fronts and becoming increasingly incapable of keeping the situation in the country under control. The situation will become even more precarious once the expected rise in gas prices hits households and the utilities sector, expensive fuel hits agriculture, transport, and food prices, and unstable electricity supplies hit production and the prime minister’s own investment plans. Therefore, the coming winter will be not only a test for Moldova’s energy sector, but also a test of the government’s political legitimacy. For several years, citizens were told that high prices were a temporary price to pay for the transition to that very “energy independence”, while European integration would soon bring the long-awaited stability. In reality, however, it is becoming clear that higher prices have become permanent, while “stability” is once again being maintained through a state of emergency, external borrowing to fund compensation payments, and little more than a faint hope for a mild winter. The PAS-Sandu regime still has some administrative resources at its disposal, along with dwindling foreign assistance and the ability to temporarily ease social discontent through compensation payments, the scale and impact of which will depend directly on market prices. At the same time, citizens are increasingly losing faith that the authorities even understand the ultimate goal of their own strategic decisions. Judging by the agenda of the National Security Council meeting, Moldova has come dangerously close to the point where a protracted energy crisis could become a trigger for large-scale socio-political destabilization, ultimately stripping the regime of what remains of its electoral support. The final act may also be approaching for the years-long experiment known as “energy independence”. And it will happen not because the authorities chose to break free from one dangerous dependency, but because they did so hastily, without proper planning or adequate safeguards, dismantling the old arrangements before they had managed to build a reliable, fully tested alternative.