Moldova looking at a cold and dark winter

Residents of what is already one of the poorest countries in Europe are looking at their gas bills at least quadrupling and their power bills doubling going into the winter. It would be nothing short of a miracle for President Maia Sandu, who promised the people European reforms, to survive the looming slump in standard of living without running into serious political problems.

“The price of gas and electricity is the number one problem of Sandu and her cabinet. Her reforms may be however successful, people simply cannot afford the price hike,” Victor Ciobanu, economic expert based in Chisinau, told Postimees. “Sandu will be forced to compensate residents for the price hike, while there are no such funds in the treasury.”

Moldova had a long-term gas supply contract with Russia’s Gazprom until September 30. While the country paid $240 for one thousand cubic meters of gas a year ago, a temporary agreement hiked the price to nearly $800 in October.

Hooked on gas

But that is only half the problem. Moldova will not have a gas supply contract at all from December 1. Gazprom is refusing to supply the country with gas until Moldova pays its debt, according to Gazprom, of $700 million. The alleged debt makes up a third of Moldova’s state budget.

The future of Moldova’s gas supply was still completely unclear yesterday (Thursday – ed.). The country has been living in an energy emergency for ten days. Ukraine has promised to give Moldova enough gas to at least maintain pressure in the transmission system.

Experts are convinced that whether a new contract will be signed with Gazprom or whether Moldova will have to start buying small quantities of gas from neighboring countries, the price will skyrocket.

Ciobanu said that the price of $800 per one thousand cubic meters of gas would hike residents’ gas bills at least fourfold. “Such bills will be too much for 90 percent of the population. People simply won’t be paying them,” the expert said.

The price of gas also affects the price of electricity. No fewer than 80 percent of power is generated by a single power plant that mainly operates on gas. Ciobanu believes the price of electricity could at least double.

“Considering all this, Moldova is on the verge of an energy crisis that would be enough to topple the government in whichever country,” the expert said. “I’m not saying it’s blackmail by Russia, but it definitely constitutes serious pressure [on Moldova].”

Gas and electricity price hikes coupled with already more expensive motor fuel will translate into all prices. Experts forecast the prices of commodities to at least double this winter.

The official average salary is a little over €400 in Moldova, while people in rural areas usually bring home around €100-150 a month. The minimum pension was recently hiked to €100. This means that price advance, no matter how slight, is a serious problem for most people, not to mention prices growing manyfold,” said Igor Munteanu, former Moldovan ambassador to the U.S. “Sandu’s rating will plummet,” he suggested.

No home front to fall back to

Viorel Chivriga, head of the economics department of the Institute for Development and Social Initiatives (IDIS), said that the price of gas being hiked many times will become a matter of survival for the people of Moldova. “I cannot imagine how the people of Moldova will survive this winter, especially if it will be a cold one,” she said. “While there could be [government] compensation, no funds have been allocated in the state budget.”

Gazprom owns the controlling stake in Moldova’s gas transmission network operator Moldovagaz. This means that Gazprom is officially entering into gas supply contracts with its subsidiary. In reality, price negotiations are handled by Moldovan government ministers in Moscow.

Munteanu said that the price of gas has always been the result of a political agreement with the Kremlin, as opposed to a financial one with Gazprom. It remains unclear what Moscow will require from Moldova’s pro-European government.

“The Kremlin wants a pragmatic and predictable relationship with Moldova,” a member of the ruling coalition in Moldova who wished to remain anonymous told Postimees. “The Kremlin has two primary interests, maintaining Russian troop presence in Transnistria and keeping the status of the Russian language.”

Economically speaking, Gazprom does not care about Moldova’s business as the country’s annual consumption of three billion cubic meters (of which two billion goes to Transnistria) is trifling compared to the 175 billion cubic meters the Russian company sent to Europe last year. However, it is impossible for Moldova to give up its Gazprom contract as there is simply no comparable alternative.

Moldova’s rulers have been unable to secure alternative gas connections for decades. While a pipeline with a throughput of 1.5 billion cubic meters from Chisinau to the Romanian city of Iasi was completed late last year, it cannot be launched in the near future as there are no suitable compressor stations on the Romanian side. While Moldova could not buy gas for less through Romania, it would at least make it impossible for Gazprom to threaten the country with cutting off its supply.

“The pipeline to Romania is an important guarantee. It would give Moldova a much better position for negotiating with Moscow,” Victor Ciobanu said. “The new government should address matters of energy independence more actively,” Munteanu added.

The residents of Moldova have been asked to limit their gas and power consumption. Head of Moldovagaz Vadim Ceban’s appeal to citizens suggested there is room to dial back. “How much of an inconvenience can it be to lower the temperature in your home from 24-25 to 21-22 degrees,” the CEO wrote. “Why boil a whole kettle full of water when you want a single cup of tea or coffee?”