Gazprom reportedly conditions gas supplies to Moldova on $708mn claim

Gazprom will continue to supply natural gas to Moldova’s separatist Transnistria region only if the central authorities in Chisinau agree to pay an overdue debt estimated by the Russian side at $709mn, Minister of Energy Victor Parlicov announced on his return from St Petersburg where he was invited for talks with the Russian company.

Gazprom seems to be speculating on Moldova’s still high (although diminished) vulnerability to supplies of Russian gas before the parliamentary elections next year. The pro-EU authorities in Chisinau have claimed their total independence from Russian gas, but the whole country continues to benefit from electricity generated using Russian gas sent to Transnistria as part of Russia’s economic support for the breakaway region.

Alternative route 

The talks between Parlicov and Gazprom officials took place ahead of the expected shutdown of the gas route via Ukraine. 

Gazprom reportedly agreed to consider alternative routes including through Turkey, but only if Moldova agrees to pay the $709mn debt, a figure that is disputed by Chisinau. 

Unless the claims are recognised, Gazprom will only attempt to negotiate an exception for gas aimed at Moldova with Ukraine – scenario to which Kyiv is unlikely to agree. 

"In my opinion, Gazprom links continuation of gas supplies via an alternative route through Turkey to the settlement of the presumptive debt of the right bank [of Moldova]," Parlikov said. 

He announced an agreement with Turkey, most likely for the rerouting of the Russian gas – meaning this now depends entirely on Gazprom.

Disputed debt 

The overdue debt is recognised by the authorities in Chisinau, but not at the value of $709mn. Upon an audit, contracted by Chisinau to an independent consultant but not recognised by Gazprom, the debt was estimated at under $10mn and Moldova is ready to settle it at this value.

The settlement of the alleged $709mn debt claimed by Gazprom is one of the clauses in the contract signed between Moldovagaz and Gazprom and endorsed by the government of Moldova in November 2021. The contract was breached already by Gazprom, when it cut the supplies to half of the agreed volumes.

In turn, the pro-EU authorities insist on the continuation of the contract, even at the reduced volume, because it secures cheap electricity to the whole country and financial resources to Transnistria.

Technically, the debt is owed by Moldovagaz – as opposed to the Moldovan government – but once recognised by Moldovagaz it could be recovered by the company from end-consumers through a price hike that would be detrimental to the government’s credibility.

Accepting payment of the debt at the value estimated by Gazprom would thus not only pose financial problems to Moldova, but would also make the pro-EU authorities in Chisinau vulnerable to public criticism for the high price of the gas purchased from European markets. It is very likely that this is the final goal of Gazprom/Russia ahead of the parliamentary elections in Moldova next year.

It may not be by chance that Moldovagaz, which is controlled by Gazprom, applied on November 25 to the energy market regulator ANRE for a 33% price hike for residential users. 

The hike has not yet been endorsed by ANRE and such a sharp hike would also prompt criticism of the pro-EU authorities’ energy policies. 

Humanitarian crisis 

An end to Russian gas supplies would have even deeper consequences in Transnistria, where it would prompt a “humanitarian crisis” in the pro-Russian separatist region, Parlicov explained before his visit to Russia. 

The users in the territories controlled by the central authorities would have to pay higher energy prices – but the 300,000 residents of Transnistria would be left without any form of energy. 

Ironically, many of them hold dual citizenship, including Russian. But most of them are also citizens of Moldova and the central authorities have to take responsibility for their energy security – which will come at a high cost. The gas needed by Transnistria this winter would cost Moldova some $400mn (2.5% of GDP), Parlicov estimates.

Still, the Moldovan government claims that contingency plans have been drafted already for all possible situations.

Independence from Russia 

Moldova needs massive investments in its energy system including both the generation and transport system (interconnectors) in order to settle its long-term dependence on Russian gas.

Transnistria has long received gas from Gazprom, for which it does not pay. This is tolerated by Moscow as the gas supplies effectively subsidise the unrecognised republic. Transnistria’s overdue debt to Gazprom is heading towards the astronomical value of $10bn – ten times the region’s GDP and two thirds of Moldova’s GDP.

An end to Moldova’s dependence on Russia for gas would end the financing of Transnistria, which has gradually turned from a pro-Russian enclave into an opportunistic recipient of economic benefits with no particular geopolitical orientation. 

Under efficient management, the economy of Transnistria – which concentrates a large part of Moldova’s industrial complex – could survive the energy price shock. But this would require stopping the financial flows towards Sheriff Holding, the conglomerate that controls all branches of the government in Transnistria, with uncertain implications for the political situation in the tiny republic.