Moldovas Foreign Policy statewatchInstitute for

Development and Social Initiatives

Viitorul

Veaceslav Berbeca

Moldovas Foreign Policy Statewatch represents a series of brief analyses, written by local and foreign ex-perts, dedicated to the most topical subjects related to the foreign poli-cy of Moldova, major developments in the Black Sea Region, cooperati-on with international organizations and peace building activities in the region. It aims to create a common platform for discussion and to bring together experts, commentators, officials and diplomats who are concerned with the perspectives of European Integration of Moldova. It is also pertaining to offer to Moldovas diplomats and analysts a valuable tribune for debating the most interesting and controversial points of view that could help Mol-dova to find its path to EU.

EnErgy SEcurIty aSpEctS of thE rEpublIc of MolDoVa

Ensuring the energy security of the Republic of Moldova is one of the main objectives of the authorities in Chisinau. Diversifi-cation of natural gas supply sources is considered to be one of the main tools that would contribute significantly to achiev-ing this. Therefore, the construction of the Iasi-Ungheni gas pipeline that will interconnect the gas system of the Republic of Moldova to that of Romania is seen by many as an impor-

tant step to reduce the states dependence on the Russian Federa-tions monopoly on gas supplies. The 27 August symbolic launch of the construction of the Iasi-Ungheni gas pipeline with the participa-tion of Prime Ministers of the Republic of Moldova and Romania as well as the European Commissioner for Energy coincided with the visit of Russian Deputy Prime Minister Dmitry Rogozin to Chisi-nau. Rogozins statements on September 2 in which he suggested that Moldova could remain without gas in winter were perceived as threats by the public in the Republic of Moldova.

Will we freeze in winter?Rogozins scandalous statements of September 2 provoked heated

debates in Moldovan society. The Russian Deputy Prime Ministers cyni-cal allusion to a possible stoppage by the Russian Federation of natural gas supplies to the Republic of Moldova prompts us to consider such a situation in the context of discussions on energy security and the need to diversify energy supply sources. Obviously, the natural question is how serious this threat really is. Leaving aside the elements of hazard and unpredictability in the Russian Federation policy, we consider, however, that the risk of finding ourselves without gas in winter is small. There are several factors that lead us to this conclusion.

Issue 69, October, 2013

BoaRd:Cornel Ciurea, Cristian Ghinea, Witold Rodkiewicz, Martin Sieg, Dan Dungaciu

EdItoR: Elenbaum John Ryan

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We need to make a distinction between the existing contracts for the supply / purchase of natural gas between two parties and the gas flows transported by pipelines passing through the territory of our state. The Moldovagazs contract with Gazprom concerning natural gas import is synchronized with the contract for the transit of the natural gas to the Balkans and Turkey. Recently, in September, this contract was extended for another year. The Russian Federation cannot halt gas supplies because these pipe-lines supply the Balkan states and Turkey as well. The risk is minimal that because of misunderstandings with the Republic of Moldova the Moscow authorities would decide to cease deliveries of gas to major consumers. The interruption of supplies would bring very high losses to Gazprom, because the natural gas consumption by the Balkan states and Turkey of about 20 billion cubic meters per year, is significant-ly higher than that of the Republic of Moldova which consumes about one billion cubic meters annually.

Also, we have to mention that the lack of a commercial contract concerning gas imports from the Russian Federation does not mean stopping gas flow of the pipelines supplying the Balkan states and Turkey. That means that if we had not come to an understanding with Moscow we still would have been able to cover our gas needs from the same sources.

In this case, two problems may arise. In the absence of a contract with Gazprom, the Chisinau authorities could be accused of stealing by Moscow. However, these accusations would have more a political character, because in this case Moldovagaz, in its turn, should not sign the contract with Gazprom concerning gas transit through the territory of the Republic of Moldova. In this situation, the entire volume of natural gas transited should be qualified by the Moldovan legislation as smuggling and is subject to forfeiture. The second problem arises with respect to the Balkan states and Turkey as a result of the situation described above. In order to avoid tensions the Republic of Moldova might come to an agreement, for example, with Turkey on substituting the gas consumed from gas pipelines with liquefied natural gas which could then be delivered to the Turkish terminals.

Obviously, this solution is viable only without some unpredictable and hazardous actions of the Russian Federation. If Moscow decided to quarrel with the Balkan states and Turkey because of the Republic of Moldova and stopped the gas flows supplying these states, we would have to resort to Plan B. That means to reach an agreement with Kiev on gas supplies to the Republic of Moldova from Ukraine. The neighboring state has solved the problem of dependence on Gazprom by diversifying its sources of gas supply. Thus, Ukraine, since 2012 has been purchasing natural gas from Europe pos-sessing thus the technical capacity and required reserves to provide the minimum amount necessary for the Republic of Moldova through the gas pipeline Bogorodceni-Cernui-Drochia1.

Is the Iai-ungheni gas pipeline a solution to diversify energy sources?

The symbolic launch of Iai-Ungheni gas pipeline construction was greeted with positive reactions by national and international experts as well as government officials of the Republic of Moldova. Obvi-ously, any measure of the Republic of Moldova authorities to reduce dependence on gas supplies from the Russian Federation and create new sources of energy supply is a commendable step. However, there are doubts about the efficiency and effectiveness of the project. These concerns are fueled by the statements of the Russian ambassador to the Republic of Moldova Farit Muhametshin that have been somehow overlooked due to the victorious mood in Chisinau. We remind you that he stated that Moscow is not disturbed by Iasi-Ungheni gas pipeline that will connect the systems of Romania and Moldova because Romania has no way to deliver gas to Moldova at a lower price.2 Moreover, he em-phasized the idea that the gas pipeline will be operational only after large investments over a long time have been made.

1 http://www.ziare.com/preturi/pret-gaze/ucraina-renunta-treptat-la-gazele-din-rusia-va-importa-din-europa-pentru-prima-oara-12030032 http://www.radiochisinau.md/farid_muhametsin_acordul_de_asociere_cu_ue_va_crea_probleme_in_relatiile_comerciale_moldo_ruse-9555

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Our worries are related to the technical parameters of this gas pipeline. This gas pipeline will be operational only if there are addition works performed to those related to Iasi-Ungheni gas pipeline con-struction. Firstly, it refers to the construction of a compressor station on the territory of Romania to deliver natural gas to the Republic of Moldova. Secondly, it is required to build a pipeline from Ungheni to Straseni in order to connect the capital as the main consumption destination of this gas pipeline. The compressor station and a new Ungheni-Straseni pipeline will require additionally about 80 million Euros.

In addition to the problems already mentioned, we wonder whether the Iasi-Ungheni gas pipeline project took into account the possible technical constraints of gas supply networks in Romania. In other words, there are questions regarding the gas transportation capacity on the segment Iasi-Ungheni. Knowing that Iasi is an endpoint in the system of gas transportation networks throughout Romania, we wonder whether under the current technical conditions Iasi-Ungheni segment will be able to ensure additional transportation of 1 billion cubic meters per year as provided for by the carrying capacity of the gas pipeline. Otherwise, it will be necessary to rebuild the segment Margineni-Iasi to ensure the natural gas transportation from Iasi to Ungheni according to the technical parameters of this gas pipe-line. This means additional expenses of tens of millions of Euros. The question is: how motivated are Romanian authorities to carry out this financial effort given that Romania, for the moment, cannot cover its consumption needs from its own natural gas resources? In these circumstances, any volume of gas supplied to the Republic of Moldova will have to be substituted by additional volumes purchased by the Romanian side from the same Gazprom and at a price higher than that which the Republic of Moldova pays to the Russian natural gas supplier.

conclusionsHaving identified all the technical and political constraints of the Iasi-Ungheni gas pipeline we real-

ize that the problem of solving the energy security of the Republic of Moldova is far from being resolved. Among the few achievements of the Chisinau authorities in terms of energy security is the fact that in 2013 Moldovagaz refused to sign the gas supply contract for the Transnistrian region which means that the company purchases from Gazprom only the natural gas volume required to cover the consumption of the territory under the effective jurisdiction of the Republic of Moldova authorities.

We may expect a deadlock concerning the efficiency of this project for the energy security, which will arouse the EU bewilderment towards the Chisinau authorities and their real motivation to solve the problem of gas supply sources diversification. The additional financial costs and technical effort required will delay the implementation of the project results for at least 4-5 years.

In this case, the obvious question is why did the Republic of Moldova not resort to a less expensive and more easily achievable tool of gas supply sources diversification? The problem could have been solved by using one of the three transit pipelines passing through the territory of the Republic of Moldo-va. Their transportation ability is about 60 billion cubic meters per year while the maximum transport rate was about 24 billion cubic meters. This means that a pipe of these three could be used for gas sup-plies from Romania by building a reverse compressor stations at Vulcanesti. If this is a feasible solution we wonder why it was overlooked and a more expensive option with the risk of not being operational in the near future was used.

This publication was produced by IDIS Viitorul with the financial support of

str. iacob hncu 10/1, chiinu Md-2005 republic of Moldova 373 / 22 221844 phone 373 / 22 245714 faxoffice@viitorul.org www.viitorul.org

Soros Foundation Moldova. The opinions expressed in this publication reflect the authors/authors position and dont necessary represent the views of the donors.