Market laws: can the EU help Moldova overcome the gas crisis

The European Union will provide assistance to Moldova in the situation with the gas crisis in the country.

This was stated by the head of the European Commission, Ursula von der Leyen, following a telephone conversation with the President of the republic, Maia Sandu.

“The EU supports the Republic of Moldova.

Our specialists are on site to help with the situation.

We are currently considering additional support measures, "- wrote von der Leyen on Twitter.

🇪🇺🇲🇩 Good phone call with @sandumaiamd.

We are in regular contact to help Moldova face its gas supply issue.

The EU stands with Moldova.

Our experts are on the ground to help with the situation.

We are currently looking into additional support measures.

pic.twitter.com/87p17Vnep8

- Ursula von der Leyen (@vonderleyen) October 26, 2021

Earlier, Peter Stano, a representative of the EU's foreign policy, spoke about the intention of the European Union to provide Chisinau with technical and financial assistance.

He also noted that alternative ways of diversifying gas supplies are being studied.

According to Pavel Feldman, Deputy Director of the Institute for Strategic Studies and Problems of the RUDN University, Brussels can provide Chisinau with only symbolic assistance. 

“The EU will probably try to provide assistance to Moldova, but you need to understand that Brussels will not solve its problems and will not take over negotiations with Russia either.

After all, the same gas crisis is flaring up in the rest of Europe, and the closer to the new year, the higher the price of energy carriers, and the less gas in the storage facilities, ”the expert noted.

Lack of progress

The statements of the EU representative came against the background of the ineffectiveness of negotiations between Moldova and Gazprom on a long-term gas supply contract.

At the time of negotiation of the agreement, the previous contract, which expired in September, was extended until the end of October.

For this period, gas will be supplied to Moldova at a price of about $ 790 per 1,000 cubic meters.

m. At the same time, last year the republic imported the same volume at an average price of $ 148.87, including transportation costs to the border.

As reported by a TASS source close to the negotiations, the Russian side offered partners a fair market price and a 25 percent discount.

In return, Moldova was demanded to repay the debt accumulated over previous years within three years.

“However, the Moldovan delegation, represented by two deputy prime ministers, Kulminsky and Spinu, citing the lack of the necessary funds, insisted on reducing the price by half the market price,” the source said.

In this regard, he noted that the risk is likely that from November 1, Russian gas supplies to the republic will completely stop.

Neither were the negotiations of a delegation of deputies of the Party of Socialists of the Republic of Moldova crowned with success, which met in Moscow with the Deputy Head of the Presidential Administration of the Russian Federation Dmitry Kozak.

Their arguments about the inexperience and "youth" of the representatives of the Moldovan government, in connection with which Moscow should apply non-market mechanisms for setting gas prices for the republic, did not convince the Russian side.

As Dmitry Kozak emphasized, Russia "sees no other arguments for the official Moldovan side, except that natural gas can be offered only at market prices." 

• Government of Moldova

• Reuters

• © Gleb Garanich

Earlier in Moldova, they said they want a new round of negotiations, calling the conditions proposed by Gazprom unprofitable.

“The price, which includes financial and non-financial terms, as well as the repayment of the historic debt in a limited time, is higher than the supply on the international gas market.

The Republic of Moldova cannot agree to pay more for gas than other states in the region, ”TASS quoted Andrei Spinu on Facebook.

Earlier in early October, he announced that Chisinau was striving to keep the price, as in the previous contract, in order to receive gas in November-December at $ 220 per 1,000 cubic meters.

m and $ 280 in the first trimester of next year.

According to Spinu, during this period, the republic's authorities are ready to discuss gas debts and the timing of the implementation of the provisions of the EU's Third Energy Package, which affects Gazprom's investments in the country.

As noted in the Russian company, the current debt of Chisinau is $ 709 million.

"If payment for gas supplies is not fully paid (for September and October of this year. -

) and, accordingly, a new contract is not signed from December 1 of this year, then Gazprom will stop gas supplies to Moldova," the official warned Gazprom representative Sergey Kupriyanov.

At the same time, he pointed out that the blame for the difficult situation in the republic lies entirely with the country's authorities.

• Gazprom building

• globallookpress.com

• © Ilya Galakhov

Finding an alternative

So far, due to the lack of new agreements with Gazprom and the deterioration of the gas supply situation in Moldova, a state of emergency has been in effect since October 22.

It is planned to keep it for 30 days.

In addition, the republic's authorities announced a contract for a trial purchase of 1 million cubic meters.

m of gas from the Polish energy company PGNiG and the American-Ukrainian company Energy Resources of Ukraine (ERU).

The Cabinet of Ministers explained this step with the intention to assess the possibility of imports from other suppliers, as well as to balance the low pressure in the natural gas supply system.

At the same time, the price of the contract was not disclosed.

As the Prime Minister of Moldova Natalia Gavrilitsa noted, the exact figure is a "commercial secret".

However, according to her, we are talking about a market price in the region of $ 1 thousand per thousand cubic meters.

In addition to PGNiG, the Dutch company Vitol won the tender for the supply of another million cubic meters of gas.

Both companies will be able to supply gas through the Alekseevka (Ukraine) and Todiresti (Romania) checkpoints.

At the same time, Moldova needs about 1.3 billion cubic meters per year.

m., and if we take into account the Transnistrian region, then about 2.9 billion cubic meters.

m.

Press Secretary of the Russian President Dmitry Peskov noted that contacts with the Moldovan side regarding the contract with Gazprom will continue, stressing that Chisinau cannot find a more advantageous offer.

"It is obvious that (these. -

) transactions can only be at a price higher than those discussed with the Russian side," Peskov commented on Moldova's conclusion of gas supply contracts with alternative companies.

Political approaches

Meanwhile, the Moldovan opposition criticized the actions of Chisinau, who does not agree to the terms of Gazprom.

According to Oleg Reidman, a member of parliament from the Communists and Socialists bloc, the country's leadership is only imitating negotiations with a Russian company and is trying to politicize the problem that has arisen.

“(The problem of the gas crisis in Moldova -

) is politicized by the authorities themselves, excluding from the list of suppliers the most reliable and voluminous one, which has always fulfilled its obligations and did not demand anything in return ... Today the conversation is about the fact that we will not talk with Gazprom.

Yes, they (representatives of the Moldovan government -

) went and bowed, as they say, just so that they don't scold at home, ”Reidman said on the air of the NTV Moldova TV channel.

He also noted that now the government is trying to shift responsibility for allocating funds from the budget for the purchase of additional gas volumes to the parliament.

Former Deputy Prime Minister of Moldova Alexander Muravsky also criticized the purchase of gas from alternative suppliers at a higher price.

According to him, the current price is likely to be twice that offered by Gazprom.

In addition, the volumes that the same PGNiG is going to deliver are negligible.

“I believe that taking into account transportation through Ukraine and other costs, it will cost us at least $ 1.2 thousand ... This gas will not be enough even for a day, except to use it for refueling lighters,” Muravsky told TASS.

Attempt to bargain

Experts believe that Moldova's delay in deciding on a contract with Gazprom and its search for an alternative suggests that Chisinau is trying to increase its worth.

However, as noted by Vyacheslav Kulagin, director of the Center for the Study of World Energy Markets at the Institute for Energy Research of the Russian Academy of Sciences, the time has not been chosen for this.

“Of course, the conversation about possible alternative supplies is applied as an element of bargaining for better terms.

But in this situation, the market is a little different, and market participants here have an understanding that now it is more profitable to buy other volumes from other suppliers, either from the point of view of supply schemes or from the point of view of the market situation, "he explained to RT.

In addition, he recalled that Europe mainly lives off Russian gas, which can be resold, and, accordingly, make a mark-up on it.

Trying to find an alternative in the form of Norwegian gas is also costly, Kulagin said, since its transportation is not cheap.

“The Eastern European market is provided primarily by Russian gas, therefore, if we talk about the fact that someone will replace Gazprom, this is only a scheme for the resale of the same Russian gas.

We have already seen such schemes on the example of Ukraine, they are realistic in principle, but from an economic point of view it is more expensive.

After all, no one in Europe will resell gas at a loss, even as assistance, ”said Vyacheslav Kulagin.

In turn, Pavel Feldman believes that Chisinau is slowing down the deal, hoping for a fall in prices.

However, according to him, such a development of the situation is unlikely.

“The problem is that“ budget ”gas cannot come to Europe by land from anywhere but from Russia.

If it is delivered by sea from the United States in liquefied form, then, naturally, its price will be much higher than the price of gas delivered through the pipeline system.

Therefore, with such experiments, the Moldovan leadership only aggravates the situation in the country, ”Feldman said in a comment to RT.

He also noted that Moldova may try to diversify energy sources by relying on fuel oil and coal, but these energy resources will simply not be able to fully cover the needs of the republic.

In this regard, Vyacheslav Kulagin expressed the opinion that Moldova should turn to international loans in order to pay off its debt to Gazprom.

“If payments are not being made, which supplier will agree to the contracts, knowingly risking that they will not receive payment for the new volume.

Moreover, now the prices on the market are high and the probability of non-payments will be more acute, ”the expert noted.

• Gas corridor marking in Moldova

• AP

• © John McConnico

According to Pavel Feldman, the debt situation arose largely due to the miscalculations of the country's leadership, which is confident that Russia owes something to Moldova.

“Chisinau's subjective view of the role of Gazprom does not in any way correlate with the laws of the market.

Of course, Moldova is not a wealthy country, which believes that it should be helped.

But it was she who brought herself to such a state, in fact, having finished off her agriculture and industry after the conclusion of an association with the EU, ”Feldman said.

In this regard, he believes, if the authorities of the republic claim any privileges and indulgences, then the dialogue should not be carried out by means of ultimatums.

However, the analyst suggested, it is likely that Chisinau may soon start making claims to the Russian Federation, which does not understand why it should provide gas at a non-market price, and will try to use its European patrons.

“Moldova, most likely, has nothing to pay at market prices, which means they will try to blame Russia for some kind of blackmail, pressure, so that the European patrons of Moldova would join and try to ask Moscow for more favorable conditions for it.

But it doesn't work that way, and in the end everyone will have to respect the laws of the market and Gazprom as the uncontested, most important gas supplier for Moldova, ”Feldman concluded.