RONDELI BLOG

2021 / 11 / 10

 

Moldova’s gas crisis has been Russia’s yet another political blackmailing

On October 30, Moldova declared a one-month state of emergency after it failed to secure a new deal with Gazprom, its major gas supplier. A tiny country of 2.6 million people wedged between Romania and Ukraine has always had its natural gas exclusively imported from Russia. However, when the contract with Gazprom expired at the end of September, the Russian company raised the price from 250 USD to nearly 800 USD per thousand cubic meters, a rate Moldova would not be able to afford. The official reason from Moscow was the “rising gas prices” driven by the market and the expiration of Moldova’s contract with Gazprom.

In October, Moldova hoped to extend the energy contract under the previous terms. However, the two sides failed to seal the deal, with Russia showing unwillingness to extend the contract due to a missing debt payment of 709 million USD, which, according to Moscow, remains Moldova’s historical debt to Gazprom. The company forewarned that unless Chisinau paid back the debt, the company would shut off the gas, plunging Moldovans into uncertainty ahead of a cold winter.

 

Political Blackmailing

Moldova’s gas crisis came after Russia made a cheaper energy deal with its ally Belarus. At the beginning of November, Belarusian President Alyaksandr Lukashenka secured a 7-10 times lower price than European spot markets for next year. Similarly, Serbian President Aleksandar Vucic recently stated that he expects “the most advantageous rate” from Moscow amid the price surge. While the Kremlin made generous discounts to the governments of friendly countries, it seems that Moscow’s intentions to pressure Moldova are, for the most part, politically driven.

Moldova is currently run by Maia Sandu’s pro-western government. Sandu won the elections in November 2020 against pro-Russian Igor Dodon. Since then, the country’s first-ever female president has sought to gain Moldova’s closer integration with the European Union (EU). In February, her reformist Action and Solidarity Party (PAS) also won a clear majority in Moldova’s general election, defeating Igor Dodon’s Socialist Party, and irritating the Kremlin. During Dodon’s incumbency between 2016 and 2020, Russia never hesitated to issue generous gas deals to Chisinau, but since the new government has been pursuing European integration with “no alternative”, Moscow has shown reluctance to offer the country such reasonable deals. 

Russia’s political motivations are pretty clear, and Moldova’s overdependence on its energy guarantees Moscow the upper hand in negotiations. While 50 per cent of Moldova’s national gas company Moldovagaz is owned by Gazprom, Moldova has almost no alternative gas supply. At the same time, approximately 80 per cent of the country’s electricity source is generated by a Russian-owned power plant in the breakaway region of Transnistria, which significantly boosts Russian leverage over Moldova’s energy security. 

Europe’s pipeline network dominated by Russian gas supply (Source: Southfront)

Kremlin officials have reinstated that a new deal was not negotiated due to “exclusively commercial” reasons and denied the involvement of any political pressure. Nevertheless, it is widely believed that Moscow has been using energy export for the sake of extracting political concessions. There are many examples where Russia used its energy as a tool for “political blackmailing”. In 2014, Moscow cancelled Ukraine's natural gas discount as agreed in the 2013 Ukrainian-Russian action plan, and similarly blamed the country’s debt to the company.

At the same time, the Kremlin might have attempted to insert its “sting” into Moldova’s energy sector reforms under the Third Energy Package to challenge the country’s Deep and Comprehensive Free Trade Agreement (DCFTA) with the European Union. It has been confirmed by Dumitru Alaiba, a member of the Moldovan parliament, that Chisinau could not “put the free-trade agreement on the table” to negotiate a cheaper gas price with Moscow. The DCFTA, which the EU and Moldova signed in 2014, has played an essential role in Moldova’s close linkages with the Union, and, as a result, 70 per cent of export products, including electrical machinery and wine, destined for the European market. Additionally, Moscow may have aimed to help prompt public disappointment towards the pro-EU incumbent party and to benefit the sidelined pro-Russian parties to undermine the image of the government’s management of the energy crisis in the eyes of Moldovans and once again emerge as significant forces.

 

“David tries to draw with Goliath”

Facing increased pressure and trade-offs from Gazprom, the Moldovan government has sought possible ways out, as the dilemma the country came into has been extremely difficult politically, socially and economically. Even though Moldova declared that it is not a choice between cheaper gas and closer relations with Brussels, Gazprom stated that Chisinau can get a better gas deal at the expense of giving up pro-EU policies. After a busy agenda with EU officials, Maia Sandu called for the Union to step up.  

Romania, Ukraine and Poland were the first to give a helping hand to Moldova’s pro-Western government. During an auction on October 25, Moldova selected the Oil Mining and Gas Extraction (PGNiG) company, owned by the Polish state, which is expected to deliver one million cubic metres of natural gas. Symbolically, having been heavily dependent on Russian energy, this is “the first purchase of gas as an alternative source” in the history of independent Moldova. 

Being familiar with Russian mechanisms of manipulation and use of energy politics as leverage, Ukraine's pipeline operator (GTSOU) sent Moldova over 15 million cubic meters of gas to demonstrate solidarity. As the GTSOU Chief Executive, Sergiy Makogon stated, Ukraine already experienced its own “energy divorce” with Russia back in 2015 and expressed readiness to offer Moldova a stable route to fully satisfy the demand for energy.

It has been more than five years since Moldova tried to diversify its energy imports, and with the assistance of its neighbour Romania, a new gas pipeline was built in 2015. However, this opportunity became limited during the crisis as it currently only supplies the small town of Ungheni, situated on Moldova’s southern border. 

Moldovan Prime Minister Natalia Gavrilita (left) meets European Commission chief Ursula von der Leyen (right) in Brussels on October 27 (Source: Radio Freedom Europe)

On October 27, the European Commission President Ursula von der Leyen officially stated that the EU would grant Moldova 60 million EUR to buy its natural gas supply. The Commission official added that further financial assistance would follow. The EU's support has been timely, yet it has been unable to fully meet Moldova's increasing natural gas demand. Consequently, being in a quandary, on October 30, Moldova’s pro-western government had no other option but to once again sign another gas deal with Gazprom with a five-year term. On November 1, Gazprom stated that “commercial negotiations with Moldova ended with mutually beneficial terms”.

It seems that the EU, which itself is struggling with an energy crisis, is powerless to diminish the pressure from Russia. Even the US, which opposed the construction of the Nord Stream 2 pipeline and promised to sanction Russia should it be used as political leverage over Europe, has yet to make an official statement.

In fact, the energy crisis in Moldova is a clear demonstration of how powerful the leverage is that Russia has gained over years; the leverage it uses to discredit pro-western governments and punish countries shifting to the democratic orbit. As a comparison, Belarus, as a true “friend” of Moscow, recently secured gas from Russia at a much cheaper rate than any country in Europe.

The energy crisis in Moldova needs to be taken as momentum for the EU and Eastern Partnership countries to increase their resilience towards future shocks. In this regard, Ukraine’s energy divorce from Russia can be a role model. The EU should foster Moldova in diversifying its natural gas supply chain in the framework of the Eastern Partnership initiative, as well as support the implementation of alternative energy projects.

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