The world has committed to transitioning away from fossil fuels to avoid the most severe threats of climate change.[1] Communities across the United States rely on fossil fuel...
Rising electricity demand. Heightened geopolitical tension. Fragility in energy markets. These are some of the big stories shaping the energy transition outlined in the International Energy Agency’s newest...
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Continuing her analysis of energy issues facing Central Asia, most recently Kazakhstan, the author discusses challenges facing Moldova in this Q&A. In 2022, Moldova became a candidate for EU membership. However, the weakness of its energy system and dependence on Russia are powerful leverage for Moscow, which is extremely hostile to Moldova’s pro-European track.
Why does Moldova’s energy system rely heavily on Russia even though the two countries don’t share a border?
During the Soviet period, Moldova’s electricity was generated by the Moldavian State Regional Electric Power Plant (MGRES) on the left bank of the Dniester River. After the Soviet Union collapsed, separatists from Transnistria (on the left bank) attempted to secede from Moldova and established the pro-Russian Pridnestrovian Moldavian Republic (PMR).[1] In 1992, Transnistria became a de facto Russian protectorate and MGRES remained under separatist control.[2] In 2005, Transnistrian authorities transferred MGRES to Russia’s state-owned Inter RAO[3] without Moldovan approval. When Moldova’s energy situation recently deteriorated in 2021, MGRES supplied up to 70 percent of the right bank’s electricity.[4]
Moldova lacks hydrocarbons. In Soviet times, the country received Siberian gas through a pipeline via Ukraine. In 1999, a Russian-Moldovan company, Moldovagaz, was established to sell gas to Moldovans and MGRES and for control over Moldovatransgaz, the operator of Moldova’s gas transportation infrastructure and assets.[5] Gazprom owns 50 percent of Moldovagaz and the unrecognized PMR government owns 13.44 percent.[6] The Moldovan government owns only 35.3 percent of the company that provides energy security for the country.[7]
Over the years, attempts by Moldova’s pro-European leaders to minimize dependence on Russia have been rebuffed by their pro-Russian successors.[8] Moldovan authorities have only managed to reduce dependence on Moscow by building a gas pipeline from Romania and cooperating with Ukrainian electricity suppliers. Several Moldovan politicians have profited from dubious deals related to energy cooperation with Russia.[9]
MGRES power plant in Transnistria. Photograph from Wikimedia Commons.
How has this dependence on Russia affected Moldova’s finances?
Based on Gazprom’s contract with Moldovagaz, Transnistria received gas from Gazprom on credit and de facto for free. Meanwhile, Moldova’s payments to MGRES for electricity went in an unknown direction for years instead of going from the power plant to Gazprom.[10] In 2017, Moldova’s pro-Russian president, Igor Dodon, offered to combine Moldova’s debt to Gazprom with Transnistria’s, but Russian-Moldovan relations began to cool down in 2020 when pro-European Maia Sandu defeated Dodon in the presidential election. By October 2021, Moldova and Transnistria owed Gazprom $709 million and $7 billion, respectively,[11] and Moscow had grounds to threaten Moldova with a supply cut or outright suspension if it failed to meet its contractual obligations.[12]
Why did the energy crisis in Moldova escalate in 2022? Does this have anything to do with the events in Ukraine?
After the victory of President Sandu, a conflict started between Moscow and Moldova over debt and gas prices. Moldova refused to pay the separatists’ debts and demanded an independent audit of Moldovagaz. Things came to a head in October 2021[13] when Gazprom reduced gas supplies to Moldova from 80 million cubic meters (mcm) down to 54 mcm.[14] Since the gas deficit affected both Moldova and Transnistria, MGRES stopped energy deliveries to the right bank and drastically reduced domestic production. In addition, Russian attacks on Ukrainian energy infrastructure in the fall of 2022 disrupted Moldova’s electricity supply and the country had to buy electricity from Romania at a higher price. EU allies and the Kremlin’s determination to prevent a humanitarian crisis in Transnistria[15] averted a bigger crisis.
Moldova was forced to declare a state of emergency and finally sign a new five-year contract with Gazprom that was almost identical to the old one. The parties agreed to assess Moldovagaz’s debt, find a way to repay it without linking it to the republic’s sovereign debt to Russia, and consider restructuring Moldovagaz to meet European energy standards.[16] However, the company cannot be divided as part of restructuring until debts are settled in the amount determined by the audit.
The situation in the Moldovan energy sector has stabilized somewhat, but threats of a different nature have emerged. When Moldova condemned the Russian invasion of Ukraine and became an EU candidate, relations between Moscow and Chișinău deteriorated.[17] The media has regularly reported Moscow’s intention to overthrow Sandu’s regime through pro-Russian forces[18] or a military attack from Ukraine or Transnistria,[19] with such reports becoming more frequent in 2023.
What measures are Moldovan authorities implementing to reduce energy dependence on Russia and how is Russia responding?
After making no progress in achieving energy independence from Russia over three decades, Moldova reduced its energy dependence on Russia in 2022. In addition to demand reduction (household gas consumption fell by 44 percent by the end of 2022)[20] and subsidies for vulnerable groups, the country plans to diversify its electricity and gas supplies.
Since Moldova became an EU accession candidate, the country’s energy integration with Europe has increased. The influence of the mostly Russian-owned Moldovagaz is weakening, while the position of state-owned Energocom has strengthened. In 2022, Energocom used a loan from the European Bank for Reconstruction and Development (EBRD)[21] to purchase EU gas and Romanian electricity at exchange rates during the heating season.[22] In October, Energocom lent Moldovagaz $56.3 million from the state treasury to pay Gazprom for two months of gas deliveries to avoid interruption of supply.[23] As a pledge for this loan, Energocom received 100 percent of Moldovagaz’s share in the authorized capital of Moldovatransgaz with all assets transferred to it. This was a direct threat to Russia of confiscation of Gazprom’s assets in case its blackmail continued.
Energocom has accumulated large quantities of gas from neighboring countries[24] that Moldovagaz is purchasing now instead of relying on Russia. Moldovan authorities have restored affordable electricity generation at MGRES for both banks of the Dniester[25] and are looking for other long-term gas suppliers, including negotiating with Azerbaijan to export Transcaucasian gas through the Southern Gas Corridor and Romania.[26]
Could Moldova become independent of Russia in the medium term and adapt to European energy standards?
EU assistance helped Moldovan authorities provide emergency power and gas in 2022. Moldova’s gas dependence on Russia decreased further this year thanks to continued EU aid and a warm winter, but as one of the poorest countries in Europe, Moldova still relies on cheap electricity from MGRES. So far, Moldova has maintained a Gazprom contract, taking advantage of Moscow’s need to support Transnistria.[27]
It’s unclear whether next winter will be as warm, whether EU support will continue, or whether a pro-European government will remain in office. Corruption, pro-Russian retaliation, or direct Russian attacks could hinder reforms.
Moldova and the region are vulnerable to unpredictable military scenarios. An unfavorable outcome in the Russia-Ukraine conflict could reverse Moldova’s recent gains toward Europe while worsening the energy crisis and the Transnistrian conflict.
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The Gulf Renewable Power Tracker is an interactive and visual database of Gulf state-owned and state-related renewable power investments and developments on a global scale.
The United States, one of the world’s two largest greenhouse gas emitters, will require reliable critical mineral supply for technologies associated with the energy transition.
