Energy and Russia Prior to February 2022, Moldova was no exception to Russia’s pursuit of ratcheting up tensions with Ukraine and Europe more broadly. Russia has long leveraged Moldova’s energy dependence to extract concessions on security and national sovereignty. In the run-up to the 2021 Moldovan elections, Moscow had left the old government on a short-term energy contract: if a party friendly to it came to power, it would renew the deal. Instead, it instantly tested the new government with its hike in gas prices.
”[14] Russia had the excuse: Moldova had struggled to meet its monthly payments to Gazprom. On 1 October 2022, Russia reduced gas supplies to Moldova by 30 per cent. The price stood at $1, 028 and the Moldovan government was forced to raise domestic tariffs yet again, this time by 27 per cent. The option remained – and remains – for Russia to halt gas supplies to Moldova completely, although it faces a large constraint in this: it would be unable to cut off Moldova on the right bank of the river Nistru without also cutting off Transnistria on the left bank. Still, Moldovans face the prospect of a cold winter, and their government is already struggling to pay crippling energy bills. The EU’s recent announcement of €250m in support, as well as additional finance from the EBRD, should make a difference in the coming months.
Reformers have avoided cutting corners when providing a legal reckoning to figures from the old regime. Oligarchs kept their property, including media outlets. This was different to Ukraine’s securitised approach before the war began in February 2022, whereby President Volodymyr Zelensky pursued so-called ‘deoligarchisation’ by levelling treason charges and organising the programme though the National Security and Defence Council rather than through the courts.
The reformist government had planned to unbundle the energy supply chain in Moldova as part of its implementation of the EU’s third energy package. This threatened the local monopoly of Moldovagaz, which is 50 per cent owned by Russia’s Gazprom and 13. 4 per cent owned by Transnistria; the Chisinau government owns 35. 3 per cent.
Less noticed was the number of Moldovans who left to get further away from the conflict, especially those with EU, mainly Romanian, passports. [8]On Moscow’s orders, in late April the authorities in Transnistria declared mobilisation and a state of emergency. The military force present in the region comprises three motorised battalions, one armoured battalion, and some recently mobilised light infantry. [9] None of these is well trained and the Russian officers posted in Transnistria since the local conflict ended in 1992 have embedded with local elites and corruption schemes. While Russia still provides security to these elites, their main interest is the pursuit of local entanglements in and between Transnistria and Moldova. There is no guarantee of them or Russian forces there playing a useful role for Russia in Moldova.
The budget deficit now stands at 6 per cent of GDP, which is a maximum in terms of the state’s future ability to service interest payments. Internal borrowing is prohibitively expensive, as the central bank has raised interest rates to 18-19 per cent to try to contain inflation. [12] With one-third of Moldovans having to spend more than half their income on energy bills, the risk of social unrest is real.
At the same time, Russia also pressed for military ‘cooperation’ with Moldova and sought to trilateralise Moldova’s bilateral trade relations with the EU, calling for its association agreement to be reopened and renegotiated. Even with the Socialist government in 2020, Moscow linked a $250m Russian loan to concessions to allow Russian firms to participate in state procurement and to nationalising private debt, although Moldova’s constitutional court struck that arrangement down. In October 2021, with the country’s gas supply contract just weeks from running out, Russia demanded a price of $790 per thousand cubic metres, up from $550, while it cut supply by one-third.
The principal beneficiaries of corruption in Moldova were oligarchs who had long dominated the country’s governments. These included Vlad Plahotniuc, at least until 2019 when his front party, the Democrats, failed to fully rig the parliamentary election. That year, Sandu was briefly prime minister for five months but had to form a short-lived coalition with the pro-Russian Socialist Party, which then allied with remnants of the old regime to eject her from office. Sandu finally triumphed with 57. 7 per cent of the vote in the presidential election in November 2020, against 42. 3 per cent for the incumbent, the Socialist Party leader Igor Dodon. Even then, Sandu had to cohabit with the outgoing parliament, but she successfully forced an early election to break this impasse.
The Moldovan authorities had also promised to audit Gazprom’s claim that they owed it $709m, $300m of which was penalties. But it has delayed the unbundling, and postponed the audit, first to 1 May 2022, later extended to 1 October 2022, and now March 2023. It has, however, appointed two Western companies, in Norway and the United Kingdom, to conduct the audit. Moldovagaz has also dragged its heels, because of what an audit might reveal about its mismanagement and graft.
The Moldovan government introduced a 30-day state of emergency and, in haste, signed a new five-year contract. In return for a lower initial price of $450 per thousand cubic metres, it agreed to a formula in which 30 per cent of the new gas price in winter (from 1 October to 1 April) would be based on gas spot market prices, with the remaining 70 per cent based on the oil market price. But spot market prices were high and rising, and much greater than Moldova’s previous payments. In the summer months, the formula reversed to 70 per cent gas price and 30 per cent oil price, which gave the Moldovan government only temporary relief. With gas prices soaring, Moldova was actually paying more in the warmer months, up to a peak of $1, 883 by September 2022; household gas payments had gone up 250 per cent.
When Russia invaded Ukraine, with the option of military pressure on Moldova no longer available to it following its stalled advance in the south, energy became a natural weapon of dependence for Moscow. And, despite its cautious approach, Chisinau was a vital strategic ally for Kyiv. According to Dumitru Alaiba of the parliamentary commission on budget and finances, “we know what to expect from Russia, as we are the most energy-dependent [former Soviet] country.
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