Mihai Melintei, Energy Analytical Studies

 

Recently, the energy issue and the concept of energy security have firmly established themselves in political and public discussions in Chisinau and Tiraspol, but the latter concept is often used against economic opportunities.

Chisinau’s task in the energy issue is to prevent Moscow’s dominance in the energy sector and gain control over energy imports and logistics from both banks of the Dniester. The energy issue for Chisinau includes the search for alternatives to the supply of energy resources from Russia, the rejection of long-term contracts and, in general, the diversification of energy supply sources (especially natural gas). At the same time, the problem of the Republic of Moldova consists in the fact that it has to develop its energy strategy in the conditions of small sales market volumes, the unwillingness of international investors to finance the creation of modern energy infrastructure, including for renewable energy, as well as geographical difficulties, which often do not allow finding alternative routes for the delivery of energy resources at a competitive price appropriate to the economic state of the Republic of Moldova.

For Tiraspol, the main task in the energy issue is to maintain energy ties with the Russian Federation. One of the main reasons why the Transnistrian region continues to exist is gas and its transit through the Transnistrian segment. Tiraspol, in its position as an internationally unrecognized entity, continues to import gas from the Russian Federation without paying the final price. The price of gas in the Transnistrian region is very low, and the various enterprises that use natural gas make a huge contribution to the development of the economy of the Transnistrian region. The Cuciurgan Thermal Power Plant (MGRES), owned by the Russian company Inter RAO, and the Râbnița Metallurgical Plant, owned until 2015 by the Russian company Metalloinvest, represents 65% of the total exports of the Transnistrian region. Thus, if at least one of these enterprises ceases to function, the economy of the Transnistrian region will suffer negative consequences. This places the possibility of the existence of the Tiraspol administration in the risk zone.

 

Interdependence in the energy field

According to the global risk and strategy consulting company Maplecroft, the Republic of Moldova is one of the nine countries in the world that are in the extreme risk group in terms of energy security. The Republic of Moldova faces the most difficult energy situation among the countries of the Eastern Partnership of the EU, considering both the lack of local resources and the lack of access to the sea. The underdeveloped energy infrastructure, the unregulated conflict on the left side of the Dniester (Transnistrian) and the constant tensions regarding gas transit in the region have created a series of problems for the energy security of the Republic of Moldova. Also, despite Chisinau’s attempts to strengthen ties with the EU, Moldova’s energy dependence on Russia is high, and the existing gas supply system is still intact.

Currently, from the perspective of the energy equation, the right and left banks of the Dniester are interdependent on each other. Chisinau is the main buyer of electricity from the left side of the Dniester, and Tiraspol is the only supplier of electricity at a competitive price suitable for the economic condition of the right bank of the Dniester. However, from the perspective of the energy infrastructure, we can identify 6 critical points for Chisinau in the relationship with Tiraspol:

• The largest power plant, the Cuciurgan Thermal Power Plant, with an installed capacity of 2520 MW, is located on the left side of the Dniester;
• Of the seven interconnection points between the Republic of Moldova and Ukraine on high voltage lines (330 kV), four are connected in a transformation station on the territory of the Cuciurgan Thermal Power Plant;
• The sources on the right side of the Dniester of electricity, the three power plants with heating (CET-Nord Balti; CET-1 Chisinau; CET-2 Chisinau) can satisfy only one fifth of the needs of the Republic of Moldova, without the Transnistrian region;
• The power plants with heating on the right side of the Dniester, as well as the Cuciurgan Thermal Power Plant, are powered by gas, and their operation depends on a constant supply of the raw material;
• Four out of five entry points on natural gas transport pipelines of regional importance, including all three entry points to the Trans-Balkan pipeline system, are located on the left side of the Dniester;
• The main natural gas compression station in the Trans-Balkan pipeline system is located near the city of Tiraspol.

At the same time, according to the contract from 2006, signed by Moldovagaz (a Moldovan-Russian energy company, which carries out transportation and supply activities with natural gas and liquefied gas on the territory of the Republic of Moldova) and Gazprom, extended on November 1, 2021 on a period of 5 years, Gazprom by agreement with Moldovagaz can conclude direct agreements with Tiraspoltransgaz (the company whose main activity is the transportation and supply of natural gas to consumers in the Transnistrian region, including the transit of natural gas) or other consumers regarding the supply of natural gas, including in the Transnistrian region (point 1.3). This point can easily be used by Gazprom, if a modus vivendi is not reached with Chisinau regarding the supply of natural gas on the right bank of the Dniester. Furthermore, according to the provisions of the contract, Moldovagaz cannot interrupt the supply of gas to the Transnistrian region without Gazprom’s written consent. According to the contract between Moldovagaz and Gazprom, extended on November 1, 2021, Gazprom committed to annually supply the Republic of Moldova with 3.3 billion m3 of gas for the next five years. Of this amount, 1.24 billion m3 of gas are supplied annually for the right bank of the Dniester, and another 2.06 billion m3 of gas for consumption on the left bank of the Dniester. About two-thirds of the gas delivered to the Republic of Moldova by Gazprom goes to Tiraspoltransgaz, which, in turn, distributes it to enterprises in the Transnistrian region.

 

Agreement to avoid energy collapse

Although the Transnistrian dispute is unregulated from a political perspective, Chisinau and Tiraspol manage to cooperate in the energy sector. Both banks of the Dniester use as the main source of energy Russian natural gas, transported through the Trans-Balkan gas pipeline. Chisinau has a deficit of electricity generation capacity, while Tiraspol has an excess. Thus, the electricity generated by the Cuciurgan Thermal Power Plant is offered at a dumping price with which no regional producer can compete. A common problem of the two banks of the Dniester in the energy issue is the need to modernize the used equipment in most power plants. At the same time, high-voltage power lines pass through the territory of the Republic of Moldova, especially the Transnistrian segment, which connects the energy systems of the Republic of Moldova with Ukraine. For this reason, for the production, supply and stable transit of electricity, it is important that Chisinau and Tiraspol maintain constructive relations in the energy sector. We can admit that the parties approached a win-win negotiation strategy. According to the strategy, both sides get roughly equal advantage. The parties agree to act in their own interest as well as in the common interest. The basis for the win-win negotiation strategy is that forms of compromise and cooperation must be more or at least as important as competition or conflict. In this sense, Chisinau and Tiraspol, in order to avoid an energy collapse, by applying the win-win strategy model, managed to solve a series of problems in a temporary manner.

At the same time, it can be noted that Gazprom and the Cuciurgan Thermal Power Plant currently dominate the energy industry of the Republic of Moldova. Approximately 70% of the electricity system of the Republic of Moldova is under the effective control of the Inter RAO company through the Cuciurgan Thermal Power Plant, and Gazprom has the majority stake in Moldovagaz, which holds the absolute monopoly of the natural gas infrastructure of the Republic of Moldova. Under these conditions, Chisinau is currently in a complex situation regarding energy security, its room for maneuver being limited.

 

Alternative options

The first intentions to change the existing natural gas supply system of the Republic of Moldova were launched in 2009. An example of this is the construction of the Iași-Ungheni gas pipeline, which fully meets the needs of the Republic of Moldova in terms of natural gas supply. The gas pipeline was put into operation in August 2014, and the first deliveries, in symbolic volumes, began in 2015. The flow of gas from the Iași-Ungheni gas pipeline is highlighted at the Ungheni interconnection point, which officially became bidirectional as of August 1, 2020 The Director of the Strategy and Corporate Management Department of the Transgaz national transport system operator in Romania, Elisabeta Ghidiu, explained in 2021 that the Iasi-Ungheni-Chisinau gas pipeline can transport up to 6.5 million m3 of gas per day, quantity that can cover the consumption needs of the Republic of Moldova, with the exception of the Transnistrian region. At the moment, the capacity of the Iasi-Ungheni-Chisinau gas pipeline is 1.3 billion m3 of gas per year, but work is being done to develop the gas pipeline’s capacities. So far, Chisinau has not reserved a natural gas import capacity from Romania. However, at the beginning of July 2023, through the Ungheni interconnection point, approximately 1.5 million m3 of gas are exported daily. The gas is purchased by Energocom and stored in Ukraine. Most of the gas that transits Romania to the east, even if it is exported to Ukraine, has as its final destination the Republic of Moldova, which currently, through the state company Energocom, purchases gas from the free market for the 2023-2024 cold season. If the trend continues, until October 1 this year, approximately 135 million m3 of gas will enter the Republic of Moldova from Romania through this point. Also from July 1, 2023, a volume of approximately 3.8 million m3/day leaves Romania for Ukraine, which means that until October 1, 2023, approximately 340 million m3 of gas will enter Ukraine.

The political changes that took place in the Republic of Moldova in 2019 and 2020 led to a resumption of discussions about the further development of the country’s energy sector and its supply with alternative resources. This is mainly due to the fact that external factors have a decisive effect and role in Chisinau’s energy policy, and energy issues are closely related to many other economic and political issues. One of the critical external factors is the transit of Russian gas to the Republic of Moldova through Ukraine. For Chisinau, in case of a crisis scenario of natural gas transit through Ukraine, the problem of gas supply could be solved for a short time by pre-filling the natural gas storage facilities in Ukraine and natural gas supply from Romania. But for Tiraspol these opportunities are closed without approval from Chisinau.

 

Beyond the Ukrainian route

An alternative for the Ukrainian natural gas supply route may become the supply of natural gas through the Turkish Stream gas pipeline. In this sense, Moldovagaz, Moldovatransgaz and Tiraspoltransgaz carried out reconstruction works of the ȘDKRI main pipeline (Şebelinka – Dnepropetrovsk – Krivoi-Rog – Ismail) to ensure the conditions for receiving natural gas in reverse mode through the SMG Căușeni gas measuring station. Thus, the Trans-Balkan pipeline can be used in reverse mode by the Republic of Moldova, receiving natural gas from the Turkish Stream gas pipeline, which will transit Bulgaria and Romania. The ȘDKRI pipeline has a technical capacity of 18 million m3 of natural gas transportation per day and an annual capacity of 9 billion m3 of gas. In this sense, Turkey, Bulgaria, Romania, the Republic of Moldova and Ukraine will ensure the reverse flow of gas if Russia (Gazprom) and Ukraine (Naftogaz) fail to reach an agreement on gas transit.

In addition, the option of supplying liquefied natural gas (LNG) to the Republic of Moldova through Greece, Bulgaria and Romania is being considered, taking into account that Greece and Turkey are preparing to expand their liquefied natural gas import capacity through 10 terminals. The aggregate regasification capacity of the 10 terminals could facilitate the import of about 110 billion m3 of gas per year in the region. However, how they could be delivered regionally will depend on the evolution of global LNG prices, as well as the removal of inherent obstacles. At the moment, the use of the Greek LNG terminal Revithoussa has succeeded, but the 4 existing terminals in Turkey remain inaccessible due to political regulatory barriers.

Another option for natural gas supply using the Trans-Balkan pipeline is the signing of a natural gas supply contract between the Republic of Moldova and Azerbaijan, and negotiations are underway between Chisinau and Baku. Thus, through the TANAP pipeline (Trans-Anatolian Natural Gas Pipeline) and by using the Greece-Bulgaria interconnector, Azeri gas can be supplied to the Republic of Moldova, transiting Bulgaria and Romania. Other natural gas supply options for the Republic of Moldova are related to the construction of LNG terminals in Romania at the port of Constanța or in Ukraine, at the port of Odesa, but also gas deliveries from Azerbaijan, via Georgia. However, today these natural gas supply options are at the project level and, at least in the medium term, they cannot be considered as feasible.

Also, as a future project and alternative natural gas supply option for the Republic of Moldova, the Neptun Deep project can be considered. The start of natural gas extraction from the Neptun Deep project in 2026-2027 doubles Romania’s gas production, covering consumption and enabling Romania to become a regional supplier of energy security in Central and South-Eastern Europe.

A major change in the consumption of natural gas in the Republic of Moldova can be implemented by reducing its weight in the total energy mix, as a result of the elimination of the electricity generated by the Cuciurgan Thermal Power Plant from the internal energy equation. The cross-border interconnection Romania – Republic of Moldova – Ukraine can strengthen this direction. Thus, electricity export/import operations can be carried out from and in the Republic of Moldova.

Consolidating the energy security of the Republic of Moldova by diversifying energy supply options and integrating into the European energy market is vital to counteracting the scenario of interruption of gas transit through Ukraine.

 

Interdependence

The geo-energy significance of the Republic of Moldova is determined by its geographical position between the main energy supplier, the Russian Federation, and the final consumers, the member states of the European Union. At the same time, the energy security of the Republic of Moldova since the independence of the republic continues to be threatened by the Transnistrian conflict. For the Republic of Moldova, which does not have primary energy resources and depends on their import, the issue of energy supply remains critical for the functioning and development of the state. In the context of the political negotiations between Chisinau and Tiraspol, the energy issue remains difficult to resolve. At the same time, the energy infrastructure of the Republic of Moldova is characterized by the high dependence of the right bank of the Dniester on the production of electricity on the left bank of the Dniester and on the gas pipelines that cross the Transnistrian region. In this sense, the energy problem in the Republic of Moldova becomes a social problem. Likewise, the energy issue of the Transnistrian file cannot be considered separately from other aspects related to the security of the Republic of Moldova, including aspects related to regional security. The experience of the armed conflict on the Dniester from 1991-1992 and the role of Russia on the left side of the Dniester (through the presence of GOTR), as well as the destabilization of the situation in Ukraine by escalating the conflict between Kiev and Moscow are important factors that determine the state of the energy problem of the Transnistrian file. Stopping the transfer of electricity or stopping the transit of gas from Ukraine to the Republic of Moldova are variables that need to be taken into account by Chisinau, in order to prevent a possible shortage of energy resources. The problem of energy security almost always forms a complex, extensive interdependence, or, on the contrary, due to the presence of such interdependence, energy problems inevitably begin to be considered through the lens of the security problem. In this sense, Chisinau and Tiraspol, in order to avoid an energy collapse, are temporarily solving a series of problems, demonstrating the interdependence of the parties in the current geopolitical context.