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EU mulls technical assistance to Moldova amid Russian gas shortage crisis

EPA/DUMITRU DORU/FILE PICTURE
A pumping station of the Moldovan-Romanian gas pipeline.

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The European Union is looking for ways to help Moldova following a supply shortage of natural gas and the absence of a new energy deal with Russian gas monopoly Gazprom, a European Commission source told New Europe.

“The Commission is looking at whether there is some form of technical assistance that can be offered. Commissioner for Neighbourhood and Enlargement (Oliver) Varhelyi has already discussed the situation with the Moldovan Deputy Prime Minister Nicu Popescu,” the source said on October 13.

Moldova’s State Commission for Exceptional Situations has reportedly declared a “state of alert” in the gas sector.

Moldova wants to negotiate gas supplies from neighbouring Romania and Ukraine while hoping to sign a new contract with Gazprom by the end of October. Caught in a struggle for influence between Moscow and the West, Moldova elected pro-EU President Maia Sandu last year. Antonia Colibasanu, chief operating officer, senior analyst at Geopolitical Futures, told New Europe on October 12 all this is political.

Romanian MEP Siegfried Muresan, Vice President of the EPP. said on October 15 the European Union, but also bilaterally, as EU member states, have discussed with Sandu how they can help Moldova in concrete terms. “We saw during our visit that Republic of Moldova is ready to embark on pro-European reforms. This EU neighbouring country deserves now our support more than ever. It is out duty to help now,” Muresan wrote in a tweet. “Republic of Moldova needs our help now more than ever. Being 100% dependent on Russian gas makes it more vulnerable than any other European country in face of increased energy prices. It is our duty to help now,” he wrote.

Moldova said that it is in negotiations with Gazprom for a new contract but, at the same time, states publicly that it is also looking for gas elsewhere, Chris Weafer, co-founder of Macro-Advisory in Moscow, told New Europe on October 15, noting that Gazprom and Moldovagaz — itself 50% owned by Gazprom — signed a 1-month contract extension of the previous contract but at the new price of $790 per 1,000 cubic meters. The average price based on the previous contract was approximately $200 per 1,000 cubic meters.

The total amount of Moldovagaz’s debt to Gazprom as of November 2020 was estimated at $7.24 billion, the Moldovagaz press service reported. Gazprom is seeking to recover this debt and not have it grow even higher, Weafer said. President Sandu told DW in the summer that neither she nor the government would negotiate gas prices with Gazprom, as this should be handled by the leadership of Moldovagaz. “It means that Moldova was very late starting to look for a contract extension and prices moved badly against them in this period. The price of political stubbornness,” Weafer argued.

Moldova has asked neighbouring Romanian TSO which is working to complete its interconnector this month when it was going to bring it online. Colibasanu told New Europe that was the purpose for which the Iasi-Ungheni-Chisinau gas pipeline was built. “When completed it can do the job,” she said. With a length of about 150 kilometers, of which 110 kilometers on the territory of Moldova, Iasi-Ungheni IP interconnects the networks of gas from Romania and Moldova, providing Moldova access to the European energy market. “The only problem that I know of is that while Romania can supply, it is Russia (Gazprom) who has control over the Moldovan Transmission system. So that is the problem. I have not checked on how much maneuvering the current government can do. So maybe I am wrong and there was some political change over the distribution system,” Colibasanu said. “Whoever has it, is the kingmaker and Moldova did not have it – that was the problem, always,” she added.

Asked if she expects this problem with Russian gas supplies to be resolved any time soon, Colibasanu said, “I don’t, really. And this is exactly what I expected to see with the current energy problem”.

Weafer said gas supplies from Russia to Europe in 2021 are at historic highs as Gazprom has increased gas production by 18.4% year-on-year and gas exports to Europe in the first half of 2021 grew by 31.5 billion cubic meters, or 33%. “It clearly is absurd, i.e., political, to say that Russia is causing the price spike in Europe,” Weafer argued.

Gazprom boosted exports in August alone by 18% month on month to 16.8 billion cubic meters (bcm). According to Weafer, gas supplies to Germany increased by 39%, to Italy by 15%, to Romania by 344%, to Serbia by 124%, to Poland by 12%, to Bulgaria by 51%, to Greece by 16%, and to Finland by 23%. “Gazprom is also increasing the volume of gas it is adding to domestic storage, as concerns about gas availability in the event of a very cold winter, are not exclusive to EU states,” he said.

Transit country problem

Weafer noted that the issue, as stated by Gazprom, is the terms it is being offered by transit countries. “Gazprom says that it is using all available ‘fixed transit’ terms but refuses to take the risk of ‘spot transit’. This is because the transit country could cancel the spot arrangement at any time and leave Gazprom not able to deliver to customers. Hence, the company has booked only a third of transit capacity through Poland for October and has not taken any ‘spot’ or ‘informal’ transit through Ukraine,” Weafer said.

The original catalyst for Nord Stream 1 was the disruption of gas transit across Ukraine in 2009. After that, Germany decided it no longer wants to take transit country risk and opted for Nord Stream 1 and then Nord Stream 2 to ensure it has a reliable route which would not be subject to political disruptions,” Weafer argued.Gazprom always positions itself as a reliable provider and has never not delivered on a contract. The company points out that even this summer, when it suffered a production disruption due to the fire at Novyi Urengoi (this is a source of gas delivered via the Yamal -Europe pipeline), the company used gas from its domestic storage to fulfil delivery contracts. Hence it now needs to rebuild these before Russian winter,” he argued.

High oil prices

Asked if high gas prices are affected by high oil prices, Weafer said, “One may ask the other way round given that the price of Brent is up 64% since the start of the year while the gas price is a multiple of that higher”.

There is no mathematical correlation between the two energy sources, at least not over the short to medium term, as users can not switch from one to the other without major investment,” Weafer said, adding, “But there is an indirect psychological impact in that, as we have seen many times historically, when one energy price rises it does term to drag others with it. But there should not be”.

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Co-founder / Director of Energy & Climate Policy and Security at NE Global Media

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