Moldova’s Search for Gas: Back to Long-Term Deals?

The authorities’ shift in rhetoric over gas supplies to the country, supposedly intended to demonstrate to the public that pragmatism takes precedence over politics, is merely aimed at reducing the potential for protests

For the past five years, the ruling party’s energy security policy has been based on an unshakable principle: abandoning the traditional model of gas supplies to Moldova. Long-term contracts were treated as inherently harmful, an instrument of political pressure and a threat to sovereignty. Cheap gas from Gazprom was deemed incompatible with the policy of achieving energy independence from Russia. The price of energy independence was high, and Moldova’s political elites in Chisinau accepted it. They were also the ones imposing this price on the broader population. There is probably little point in revisiting the substance of the arguments that filled the information space. They were not economic in nature and therefore hardly lend themselves to economic analysis, although the authorities were quite adept at juggling the figures. This was a deliberate strategy aimed at pushing the Russian Federation out as an exporter of energy resources in the region. During the May summits of the European Political Community in Dubrovnik and Yerevan, the Romanian president bluntly stated that this entire effort amounted to an attempt by the European Union to exert geopolitical control over the surrounding region. Calling things by their proper names is much easier for mathematicians, so he went on to describe the issue of gas supplies as “political and economic”. He also acknowledged that it would be in the common interest to distance ourselves from Russian imports, while the American interest lies in gaining access to the European LNG market and replacing Russian supplies. There it is, the whole truth in just a few lines about Brussels’ and Washington’s energy strategy over the past thirty years. Within this framework legal restrictions were first introduced on the activities of Gazprom’s subsidiaries, and the process eventually went as far as the physical destruction of infrastructure, presented as the only fully functional solution and an ironclad argument for those elites that continued to associate their bright future with cheap Russian energy. It is worth recalling that the current argument put forward by PAS representatives boils down precisely to the physical impossibility of receiving gas from Russia. What are they supposed to do, carry it over in a bucket? However, the runaway rise in prices on the exchanges, coupled with the de facto admission by officials from the Ministry of Energy and Energocom that arguments and disputes over when it is best to buy gas are pointless, since the price will in any case be determined by the market on the eve of delivery, has exposed a deeply unpalatable reality. It turns out that the country is doomed to buy gas at the highest possible prices because of the lack of competition, requirements imposed by creditors, namely the EBRD, and the additional costs of paying intermediaries for trading on the exchange and for transportation. Such a scheme may still work under conditions of geopolitical calm. But the bellicose rhetoric coming from our leadership in recent years has made it increasingly clear that the country is heading not toward calm, but toward an intensifying storm around it. Yesterday, Energocom announced its gas procurement price for October, reporting that it had come to €76.346 per megawatt-hour, €0.824 below the price factored into ANRE’s tariff for October–December. A rather dubious achievement. The sudden change of tune on relying solely on the exchange and the need to return to long-term contracts should become another new item on the agenda of our Prime Minister Vasile Tofan. It should restore hope among the residents and businesses of our long-suffering country that gas prices might return to moderate levels, back when deindustrialization and heating homes with dried dung were not yet being considered a mass-market option. It should be noted, however, that our prime minister immediately drew a red line here as well. Unlike his predecessors, he has no intention of negotiating “even with the devil” in the interests of the public. And Russia is not being considered as a source of gas supplies. So what options are left? Qatar, Azerbaijan, Turkmenistan? All of these suppliers already have long-term contracts extending decades into the future with major buyers. Who would be interested in Moldova given its level of consumption? That is why no one is seriously talking about imminent gas supplies under such contracts. In the medium term, there are indeed options, but work on them needs to begin today, and not even primarily on our side. For suppliers, our country can only be viewed as a small transit link, one that will have to accept their terms. Returning to the outspoken Nicusor Dan, one can look at his own experience of negotiating with potential gas suppliers in the region, as well as with the United States. The Romanian leader acknowledged that securing full-scale LNG supplies from across the Atlantic would require substantial investment in gas reception infrastructure in Greece. Such investments would have to pay for themselves, which raises the key question: are there enough buyers in the region? In other words, the demand from the US partners is that all countries along the Vertical Corridor purchase gas in sufficiently large volumes to justify these investments. To ensure the necessary supply volumes, Romania was reportedly advised to halt development of its offshore gas field. The matter escalated into an international scandal when the Americans’ demands, accompanied by threats of a change in government, surfaced in diplomatic circles and later became public. Moreover, it was Romania’s own Ministry of Energy that was involved in lobbying US interests in the neighboring country. These examples clearly demonstrate that implementing long-term energy projects requires more than the authorities’ outward show of pragmatism. More often than not, it is directly tied to giving up part of one’s national interests. The Romanian authorities’ room for maneuver proved to be minimal. As for our country, there is no reason to speak of any real ability to withstand such pressure either. Just imagine the authorities beginning to strongly urge households and businesses to abandon alternative energy sources and consume as much gas as necessary to make the American gas delivery project economically viable. This may sound surreal to us, but for American businesspeople it is merely another line in a report showing where the profits are to be made. US LNG exports are growing rapidly, while Russia is cutting gas production. Against the backdrop of Brussels’ announced ban on imports of Russian LNG under its 19th package of sanctions, only American suppliers can reliably make up for the shortfall in Russian fuel. This year, they have demonstrated that they still possess the geopolitical and military-political capabilities to reshape the global energy market to such an extent that geographic considerations in economic cooperation are pushed into the background. Until recently, Moldova was part of a major international energy project, but it actively contributed to its dismantling, citing risks and threats deemed unacceptable for the country, as well as significant damage to its national interests. Now all that remains is to wonder what price participation in another large-scale project of this kind will carry, assuming our country is offered a place in it at all.