Russian Gazprom Ready to Pounce on Moldovan Prey (Part Two)

*To read Part One, please click here.

Four rounds of Russian-Moldovan negotiations in October over natural gas supplies have revealed the two sides’ conflicting positions (see Part One).

The Russians propose signing a gas supply contract with Moldovagaz for the month of November, at the spot market price of $1,000 per one thousand cubic meters (no public information about the volume) and, in due course, a contract for December at the spot market price. The Russians offer a 25 percent discount from those dizzying prices, on the following conditions: 1) Moldova to pay immediately for Russian gas received during September and October in the Moldovan government-controlled territory (right bank of the Nistru river, as distinct from Transnistria on the left bank); 2) the Moldovan government to take responsibility for Moldovagaz’s company debts to Gazprom, turning those into Moldovan state debts, again for gas received in right-bank Moldova; 3) Moldova to commit to repaying those debts within the next three years; and 4) Chisinau to accept yet another postponement of “unbundling” Moldovagaz, as the European Union’s Third Energy Legislation Package requires, into independent companies for gas procurement, transportation and distribution. Gazprom takes the position that the unbundling would affect Gazprom’s assets in Moldova, given that Gazprom holds 50 percent plus one share in Moldovagaz.

Those are Gazprom’s conditions for signing supply contracts for November and December. Moldovan compliance with those conditions would open the way to negotiations for a multi-year supply contract with Gazprom (Kommersant, October 22; RIA Novosti, October 22, 23, 25; TASS, October 22, 25).

According to Chisinau insiders, the Russian side further proposed holding trilateral discussions among Russia, Moldova and the European Union about the impact of the EU-Moldova Deep and Comprehensive Free Trade Area (DCFTA) upon Moldova’s bilateral trade with Russia. The Russian government aims to adjust that DCFTA in line with Russian commercial interests, but also (and perhaps mainly) to set a precedent for Russian interference with the EU-Ukraine and EU-Georgia DCFTAs.

Gazprom is assessing right-bank Moldova’s debt at $709 million (RIA Novosti, October 23), apparently updated to $715 million (Kommersant, October 19, 22). Of that total, $433 million represents the principal, while interest and penalties account for the remainder of the total alleged debt. Gazprom takes the position that this alleged debt is higher than Moldovagaz’s market value. Such a claim seems to hint that Gazprom could demand reimbursement in the form of Moldovan assets.

A vituperative statement by Gazprom spokesperson Sergei Kupryanov expressed “bewilderment” at Moldova’s falling into arrears: “Moldova has provoked this crisis. Gazprom is a company of shareholders and cannot accept such losses. You must pay on time for the goods received” (TASS, October 23).

The Kremlin and Gazprom, however, seldom mention Transnistria’s debt for Russian gas consumed there. That debt is at least ten times larger than right-bank Moldova’s. It amounts to $7.4 billion, according to Moldovagaz; or “approximately $8 billion,” according to Gazprom (Kommersant, October 19). Transnistria’s leadership from time to time confirms the growing multi-billion arrears, promising to hold talks about reimbursement at some unspecified future time. Gazprom never seriously attempted to collect Transnistrian debts in the last 15 years. With such laxness, Gazprom defrauds its own shareholders (they do not seem to complain). The Kremlin is thereby using Gazprom to subsidize Transnistria and keep it afloat.

The Moldovan government rules out discussing political matters within negotiations on natural gas, Prime Minister Natalia Gavrilita assured the country several times (Ziarul National, October 22, 25) after the negotiations in Moscow with Russian Presidential Administration deputy head Dmitry Kozak. Apparently, Chisinau has understood that sending its negotiator on the Transnistria conflict to discuss natural gas supplies with Russia’s negotiator on the Transnistria conflict—or to combine the two tracks into one process—is inappropriate and risky. Inviting Kozak to Chisinau for the second time in two months, this time to discuss the gas crisis, also signaled nervousness and a degree of confusion. The Kremlin has muddied the waters by giving Kozak a second hat as supervisor of Russian-Moldovan economic relations. Chisinau must keep those two tracks separate from each other. Moldova’s top officials handling the gas crisis—especially Prime Minister Gavrilita and Deputy Prime Minister and Infrastructure Minister Andrei Spinu—display a reassuring sang froid and poise in this situation.

These officials have stated Chisinau’s basic positions during the negotiating rounds as follows: 1) Gazprom’s proposals—both economic and extra-economic ones—run counter to the interests of Moldova’s citizens, hence negotiations must continue toward a mutually acceptable outcome. 2) This Moldovan government does not recognize the $700 million dollar debt to Gazprom, because it is far from clear who calculated it and how. Moldova demands an independent professional audit (with both Chisinau’s and Gazprom’s participation), with a view to calculating any debt correctly and restructuring it. 3) Chisinau aims to switch from short-term to longer-term contracts (one year to three years) and from spot-market gas prices back to indexing the gas price to the basket of crude oil and oil derivatives. An option also exists to use the oil basket price indexation for gas supplies in the first and fourth quarters of the year (the heating season) and a gas price corridor in the second and third quarters, similar to that in Gazprom’s contracts with a number of European countries (RFE/RL, October 11; Unimedia, October 18; Ziarul National, October 22, 23, 25, 26; IPN, October 26).

Russian negotiators have apparently told Moscow media that Chisinau could agree to postpone the unbundling of Moldovagaz (TASS, RIA Novosti, October 22, 25). It does, indeed, seem that Chisinau has little choice in the matter, considering Gazprom’s supply stranglehold and its 50 percent plus one shares in Moldovagaz.