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Foreign Policy

Putin’s war is forcing Moldova to escape Russia’s gas trap

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CHIȘINĂU — With the war in Ukraine raging just across the border, Moldova is scrambling to end its near-total reliance on Russian gas.

For decades, Moldova maintained close ties with Moscow and benefitted from cheap gas imports. In recent years, those relations have soured, the bills have soared and Chișinău has found itself trapped in a cycle of debt and division that threatens both its economic and political stability.

With Moscow blocking energy exports to countries it claims are pursuing an “unfriendly” foreign policy, many fear Moldova could be next to face its ire. 

“It is safe to say Russia is ready to weaponize energy dependencies in relation to the threats it perceives from the West,” said Olivia Lazard, a visiting scholar at Carnegie Europe. “The question is how it plays out in Moldova and whether it could backfire against [Russia] in the long term.”

Moldova’s President Maia Sandu is pushing hard to accelerate the country’s pivot to Europe: In March, the country — which has an association agreement with the EU — formally applied for EU membership and synchronized its electricity grid with the bloc’s. “We belong in the EU,” she told MEPs in an address in May.

The country will need a lot of help from Brussels, she also admitted in her speech: “The socioeconomic situation is difficult. The dramatic increase in energy prices is the main reason for a historic surge in inflation — 27 percent.”

In the meantime, Moldova is bracing for impact — and scrambling for alternative fuel supplies.

“The crisis we have is making us smarter,” said Veaceslav Ioniță, an economist and former Moldovan MP. “But why has no government, no politician, looked for alternatives before now when Russian gas was giving us no advantage?”

Under pressure

Moldova’s complete reliance on Russian gas is partly the result of a long-running conflict that has split the country.

Since the fall of the Soviet Union, the breakaway region of Transnistria has governed itself independently from Chișinău, inviting in around 1,500 Russian troops as part of what Moscow insists is a peacekeeping agreement.

Under Moldova’s deal with Russian state-backed gas supplier Gazprom, “they pump supplies and don’t rush to be paid as long as it is allowed to flow to Transnistria as well,” said Igor Munteanu, director of the Institute for Development and Social Initiatives in Chișinău. 

Transnistria is home to large manufacturing and industrial complexes, many of which are operated by oligarchs close to the Kremlin, said Munteanu.

That means it guzzles a disproportionate amount of energy relative to its population. Moldova’s average annual gas consumption is close to 3 billion cubic meters and Transnistria accounts for around 1.6 billion bcm, despite having only a fifth of the country’s population. Chișinău is left to foot the whole bill.

The upshot for the capital is that Moscow is lenient on payments — an arrangement that helped the country’s struggling economy stay afloat.

The deal began to sour in recent years, and the war in Ukraine has intensified the effort to get rid of the dependence on Russian energy.

“Up until 2005, we bought Russian gas at two or three times below the market price,” said Ioniță, the former MP. “But that price has risen as Moldova has pursued European integration, and they have punished us by forcing us to pay more and more.”

In April, Moscow’s gas export monopoly Gazprom handed Chișinău a bill for €1,110 per 1,000 cubic meters of gas, a steep rise from just €509 in March — and 10 times higher than the same month last year, according to Ioniță.

Under the terms of a new contract signed in October, the amount owed is based on the fluctuating spot price of gas and oil rather than the previous long-term fixed tariffs.

The contract brought Moldova back from the brink of a national emergency, after its previous deal ran out in September and Gazprom repeatedly threatened to turn off the taps as part of a dispute over €676 million in unpaid debts for past deliveries. Sandu’s government disputes the scale of the arrears, and Gazprom has delayed requests for an external audit.

The country has kept up to date with payments for its current supplies, but the rising cost and the possibility that Moscow could decide to scrap the contract until the overdraft is paid has made the situation increasingly fraught.

Exit strategy

Among alternatives being explored by Sandu’s government is a new 120-kilometer pipeline linking Chișinău to the Romanian city of Iași. The pipeline is capable of carrying up to 1.5 bcm of gas — more than a third of Moldova’s peak needs. 

Construction was completed last summer but given Moldova’s contract with Gazprom, starting the flow of gas along the new pipeline wasn’t considered a priority. Now, Bucharest says it’s a matter of urgency, although prices are yet to be negotiated. 

Munteanu is optimistic a deal can be done. But it’s an open question whether Romania will be as lenient as Gazprom in allowing the cash-strapped country to rack up debts and whether Western nations might be willing to step in to help with the bills.

In December, Brussels made available €60 million in funds to help Moldova cope with rising fuel costs, and last week adopted an External Energy Strategy that pledges further support for Moldova. The bloc has also helped Romania increase its gas storage capacity from 3 billion bcm to 4 billion bcm, meaning it will be better equipped to help meet Moldova’s needs.

“There is an understanding in the EU now that there will be no energy security that can hold water without working actively with close partners in the direct neighborhood,” said Carnegie Europe’s Lazard.

With Sandu continuing to seek support for a turn toward the West, the Kremlin seems to have overestimated its ability to use energy exports to keep the former Soviet Republic in its orbit. 

“There’s one person who deserves all the medals for putting Moldova on the road to European integration,” said Ioniță, “and that’s Vladimir Putin.”

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