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Energetic dependence
Iurie Gotisan, 3 September 2004

For a while now the energetic sector that is of vital importance for the economy has become a battle field where political and economic interest collide. On the one hand, there is a struggle between domestic players in the field, and on the other there is an increasing pressure from several Russian companies seeking to extend their spheres of economic influence in Moldova, both via acquisition of assets as well as involvement in production, delivery and regulations in the energy sector. This specifically refers to Russian Gazprom, the world leader in the field, having an annual output of around 500 billion square metres.

Noteworthy, currently EU economy imports 52% of its energy, however by 2020 the enlarged EU (30 countries) would import 78%. Oil and natural gas are of key importance. Growing gas consumption in Europe in the next two decades would be almost totally covered from Russian exports, which would double to EU. There are plenty of examples in history when such a heavy reliance on imports from one single country was exploited by that country as a virtual means to wield pressure or exert strategic political threats. Hence, in the last 30 years various oil crises, regional conflicts and errors in domestic energy policy have been quite illustrative of the strategic and political importance of energy source.

Even if EU has sufficient "currency" to counterbalance its ties with Russia, Central and East European countries, including Moldova, are far more vulnerable, whereas the pressure they face is far from virtual but rather more straightforward. When you are not under the strong EU club umbrella and don't have at least a square meter of gas in your land, and the bill for consumed natural gas exceeds by far the national budget, gas supplier (in our case Gazprom) should be duly rewarded in political, diplomatic or commercial currency. In the last decade there were numerous incidents when the gas supply was cut, back then Russia was not the only bad guy, but also Ukraine on whose soil gas transits.

Unfortunately one has to acknowledge that economic independence of Moldova is a nice dream. Being aware of the key importance of gas in ensuring Moldova's energetic security, Moscow managed quiet easily to turn it into a tool for wielding pressure on Chisinau domestic and foreign policy. Moldova's dependence stems from two facts. Firstly, the lack of own resources that may be explained by geographic factors and equally so by dependence on a single source of imports, namely natural gas from Russia. Secondly, a more dangerous one - debts. According to official statistics, Moldova's total debt on natural gas supplied by Russian Gazprom, including the penalties, is estimated at 300 million USD, whereas Transdnistrian debt exceeds 1 billion USD.

At the same time Government is not actually trying to change this state of affairs, which may lead one to the conclusion that energy imports from Russia to Moldova are more than mere "import" that cannot be explained by the strive to maximize the profit. In the case of Moldova, widening its berth for manoeuvres is directly proportional to swelling debt on gas supplied by Russia, which conditions debt payment by participation of its companies in the privatization of Moldovan companies. The fight for companies in energy sector has become an economic and political affair due to strong lobby campaigns undertaken by each of the individual players. After all it is quite clear why political reasons take over economic ones.

This also explains Russia's tolerance towards Moldova's huge debts, as political gains in the long run may well compensate net present value. Moldova's passive energetic policy may enhance even further the negative consequences in case Russia puts "energy weapon" in use. Chisinau does not try to go one step ahead and anticipate changes in the bid terms, nor does it attempt to make an order in its relations with Transdnistria, diversify its suppliers, or change the archaic and high energy consuming industry and public sector. In fact Moldova turned into an attachment of the Russian energy policy, not even having an active position at the negotiation table. Unless Chisinau energy policy improves, in the near future Moldova's dependence on Russia would further increase.

In this respect, the relations between Ministry of Energetics, Moldova-Gas, Union Fenosa and Moldoelectrica have become quite tensed. Nothing of this would have happened if Moldovan-Russian negotiations on debts payment had not been held behind closed doors, and if relations between companies on the market and regulatory institutions on the market had been ruled by the law rather than telephone calls. Furthermore, recent escalation of the conflict between regulatory agencies (Ministry of Energetics and National Agency for Regulation in Energetics) is yet another weak point on the market. The conflict was triggered by the cut-offs of electricity in many localities of Moldova by Cuciurgan Thermoelectric Station. It is known for a fact that it is operating on natural gas supplied by Gazprom and is controlled by the Tiraspol secessionist regime, which in turn is loyal to Kremlin.

Shortly after the "show" was over, another actor showed up on the scene, i.e. coming directly from Moscow the Deputy-Chair of Gazprom, Aleksandr Reazanov. His company together with RAO ES have never made a secret out of their interest to control energy export to the Balkans. Russian dignitary stated at the meeting with Moldova-Gas leadership that Russian Federation was ready to restructure Moldova's debt on natural gas for another five years. By tolerating Moldova's impressive bills, Russia seeks to secure political attachment from Moldovans towards Russia.

Nevertheless, Chisinau has made no effort to find a solution. Moreover, it has undermined even the modest undertakings of the previous governments to increase imports from Romania as well as to diversify import sources, like from Romania and Ukraine. There is no excuse for the Chisinau's refusal to Bucharest's initiative to finalise together the construction of Cernavoda atomic station that would have entitled Moldova to energy produced at one of the reactors. Albeit very advantageous for Moldova the proposal was declined. Of course it would have required an investment from Moldova, however in the long and mid term these would have been worthwhile.

Restructuring state enterprises in the thermo-energetic sector would be one alternative that would allow reducing costs on raw materials. Because of high production costs and obsolete equipment the latter are the greatest gas consumers and the main Moldova-Gas debtors. A reminiscence of the soviet-type mentality, freezing debts swells the budget deficit even further, as well as total debt to energy suppliers, mainly Russia. Private consumers account for only 20% of the gas consumption which as a rule is paid on time. If those measures are taken they would reduce debt burden and bring relations between Moldova and Russia from political to economic dimension. Moldovan politicians should consider a quite interesting fact Central and East European countries are as much dependent on energy imports from Russia.






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