Russia to Moldova: Choose cheap gas or EU integration

The EU-Moldova Association Agreement was overwhelmingly approved by the European Parliament today.

Russia told impoverished Moldova yesterday (12 September) to choose between low-priced gas from Russia and its pledge to adopt European energy liberalisation measures opposed by Moscow, which is girding for a conflict with Europe over natural gas.

"First of all, we propose that Moldova denounce the protocol on entering the Europe energy community agreement. This is a precondition for us to discuss the issue of gas price cuts and the relief of debt, which at the moment amounts to $4.1 billion [€3.17 billion]," Russian Energy Minister Alexander Novak said, as quoted by Reuters.

Moldova joined the EU-sponsored Energy Community, in 2009, together with Ukraine. The Energy Community, established in 2005, is designed to integrate the energy market of southeastern Europe with the European Union.

Novak spoke before Russian President Vladimir Putin met Moldavian Prime Minister Vlad Filat in the Russian resort of Sochi.

Novak made no reference to the 20 billion cubic metres (bcm) of gas transiting each year through Moldova to Europe, which imports about 150 bcm from Russia annually.

But an ultimatum issued to a transit country is likely to raise alarm in Europe.

Supplies to Europe via Moldova were briefly interrupted in January 2006 in a pricing dispute – a minor disruption compared with the loss of European gas supplies that resulted from later pricing conflicts with neighbouring Ukraine, which handles a much larger volume.

Last year, Moldova – a former Soviet republic of 3.5 million people – paid $1 billion (€770 million) for 3.1 bcm of Russian gas, far less than European customers.

Novak said that the country is asking for a 30% discount in current talks. Moldova has in the past accumulated obligations on gas supplied to the ethnic Russian enclave of Transdniestr, which receives heavy support from Moscow.

Putin suggested Russia could help the struggling economy, heavily dependent on agricultural exports, with investment cash from companies such as gas export monopoly Gazprom and a bigger market for Moldova's wine.

Gazprom already owns half of Moldova's gas transit pipelines, which carry Russian gas to the Baltic states.

Relations between Russia and the European Union took a downturn earlier this month when the European Commission launched a probe into Gazprom's pricing and supply practices in Europe.

The EU has said Gazprom is suspected of abusing its dominant market position in key markets, imposing unfair prices on consumers in its oil-linked long term contracts and hindering the free flow of gas.

The Kremlin has thrown its weight behind Gazprom, and issued a decree which could effectively block European regulators from obtaining necessary information from the company during the probe.

EU countries negotiate their gas imports with the Russian monopoly Gazprom individually. Gazprom sells its gas with considerable price differences. The company is largely seen as the arm of Russia’s foreign policy and its deals often “reward” or “punish” individual countries.

Outside the EU, the most drastic examples are Belarus, a country with closer relations to Moscow, which pays $100 (€76) per 1,000 cubic metres, while Ukraine, another former Soviet republic, pays $416 (€314) per thousand cubic metres. Ukraine is trying to negotiate a fairer price at $250 (€189).

On 4 September, the Commission opened an investigation on Gazprom for alleged abuse of his dominant position.

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