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Ukraine war disrupts Moldova's energy plans

Sergio Matalucci
March 10, 2022

Ukraine's neighbor to the west has been building ties with the European Union's energy grid. But the war could hurt Moldova's efforts to wean itself off Russian gas.

Natural gas pipelines in Moldova
Moldova's energy ambitions are entwined with Ukraine'sImage: Aurel Obreja/AP Photo/picture alliance

As Russia wages war in Ukraine, ties between Moscow and nearby Moldova could also deteriorate, with the energy sector becoming a dangerous battlefield of its own. 

While the Russian government was preparing for its recent military aggression, Ukrainian authorities were making the first moves to prepare for the synchronization of its local energy grid with the European continental network. This technical procedure would allow both Moldova and Ukraine to import electricity from the EU. Currently, Moldova is heavily dependent on Russian gas. 

These initial steps ran smoothly, Valeriu Pasa, president of WatchDog.MD, a Moldovan think tank, told DW. "The system is very stable. The frequency is okay. It was a successful test."

Government sources concurred and stressed that the project was not linked to Russia attacking Ukraine.

"We should not seek to politicize everything here," a government source told DW. "So far, electricity trading will not be allowed for a year, and even that will have to be confirmed."

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Entwined with Ukraine

Still, the war has had repercussions on the region's energy sector. Ukraine and Moldova have decided not to reconnect to the Russian and Belarusian grid. For now, things are going well. But risks loom. The Russian military could keep targeting Ukraine's energy infrastructures.

"If the electricity system of Ukraine is affected and is not stable, we will have shortages," said Pasa. "More importantly, our [Moldova's] electricity system cannot work if isolated from the Ukrainian one."

In the Moldovan case, there is no shortage of critical factors to consider.

"Also the power plant in Kuchurgan, in the Transnistria region, needs to adapt to the European standards. But this requires difficult negotiations," said Pasa.

The Kuchurgan Power Station, also known as the Moldovan State Regional Power Station (MGRES), provides around 75% of the electricity consumed in the entire country. Moscow-based Inter Rao is a co-shareholder of MGRES. Kuchurgan facilities run on gas delivered by Russia's Gazprom. Cheap gas to Transnistria has provided Moldova with relatively low electricity prices over the last years, especially in comparison to neighboring countries.

"People in Transnistria have not paid market prices for the last 30 years," said Pasa.

Then, last week, Transnistria's separatist government declared independence.

"They already did so in the 1990s, and last week's announcements do not change anything," said Pasa, adding that Moscow dictated Tiraspol's decision. "Just a month ago, the separatist leader Vadim Krasnoselsky wrote letters to Moldovan President Maia Sandu saying he was ready to embark on political discussions."

The rest of Moldova also imports Russian gas. Last October, Gazprom and the government signed a new five-year contract. In January, the price was over $640 (€578) per thousand cubic meters. Now European gas spot prices have become extremely volatile, reflecting war-related uncertainties. Price levels remain high, recently hitting over $2,500 per thousand cubic meters.

According to Bucharest-based energy analyst Cristian Tataru, the price of gas will increase significantly in Moldova, too, as a function of the pricing formula.

Reverse flows to the rescue?

PAS, Moldova's pro-European party, won an absolute majority in July 2021 elections. The country, now led by two women, showed an unprecedented level of openness. An example: The presidential palace, traditionally closed to visitors, now keeps its gates open.

That openness is reflected in the country's more diversified energy strategy. Reverse flows of gas to Ukraine, which started in 2015, are also available for Moldova. The country can import gas from Romania or Poland through the Trans-Balkan pipeline and the Iasi-Ungheni-Chisinau gas pipeline. Were Russia to halt deliveries, it's likely the government would combine these options.

But it wouldn't come cheap. According to experts, at the very least energy prices would double, likely followed by political and social consequences. When tensions between Moldova's ruling party and Russia caused prices to double in September 2021, the ruling party's popularity rating went down by a third.

This week provided a glimpse of how the energy problem might get worse. Russia said it would shut down Nord Stream 1 — its main gas pipeline to Germany — if Western countries were to proceed with a threatened ban on Russian oil. On Wednesday, the US made good on this threat, banning imports of Russian oil, coal and gas. The European Union, which is far more reliant on Russian energy supplies, said it would phase out this dependence in the coming years, but stopped short of a ban.

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Many ideas, no clear solution

Government sources point to many options for how to increase Moldova's energy security and political stability, despite high inflation, security concerns and a potential refugee crisis.

For one, Moldova could take part in programs organized by European institutions to test the resilience of EU energy infrastructures. "Ukraine was involved in these tests and likewise we should do so as well," a government source said.

The country is also developing two 400 kilovolt electricity interconnections with Romania: Isaccea to Vulcanesti and Suceava to Balti. "The one to Vulcanesti aims to ultimately bring a link to Chisinau by 2024," said the government source. The Suceava-Balti line will take at least two years to complete, another government source said. 

Moldova: The exodus continues

Moldova is also trying to increase gas stores in Romania to use next winter. It could also proceed with an audit on the debts that Moldovagaz, the country's gas distributor, has towards Gazprom.

But the government sources say that may prove difficult. It's possible Gazprom wouldn't accept the outcome.

"Gazprom delivered gas to Moldovagaz and did not receive payments. They accumulated $750 million dollars in 20 years, including the penalties," said Pasa. Moldovagaz took control of the Moldovan part of the Trans-Balkan pipeline "simply for free, when the asset's value was around half a billion of dollars."

As is often the case, the future will come down to a matter of technicalities and legal issues. But in those details experts see a relevant geopolitical and political dimension, one that could close the doors of the presidential palace once more, or open them even further.

Edited by: Kristie Pladson

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