Publication: Monitor Volume: 4 Issue: 176

As payment for part of its arrears, the Moldovan government has tentatively approved a plan to turn over to Gazprom 50 percent of stock in the country’s gas supply system. Moreover, Transdniester would receive 13 percent of the stock under this scheme, which would lay Moldova open to economic and political pressures. The plan seems reckless even if Russian troops had not been stationed–as they are–in Transdniester, despite Moldovan and international demands for the troops’ withdrawal.

To repay another portion of the debt, the government has adopted a decision to issue US$90 million worth of state bonds to Gazprom. The bonds would mature in seven years, and Gazprom would cash in a 7.5 percent annual coupon. According to Moldovan officials, it was Gazprom who insisted on this solution, which is bound to damage Moldova’s relations with the International Monetary Fund, let alone Moldova’s own financial situation.

Ironically, Transdniester accounts for a full two-thirds of Moldova’s overall debt–approximately US$600 million–to Gazprom. Nevertheless, the Russian company has halved its overall deliveries to Moldova from 3 billion to 1.5 billion cubic meters since July of this year. The Moldovan government seems desperate to have the full volume reinstated as winter sets in. The Finance Ministry and National Bank opposed the deals, but were overruled by the cabinet of ministers in its September 22 session. Chisinau has thus far failed to de-monopolize and privatize the energy sector, and has gone into debt to Gazprom largely because the state had for political reasons assumed the debts of defaulting consumers. The deals with Gazprom are subject to parliamentary approval. The pro-reform parties have yet to be heard from on this subject.

The IMF’s resident representative in Chisinau, Mark Horton, promptly went public to criticize these plans from a purely economic standpoint. Horton remarked that they were inadequate substitutes for a real reform of Moldova’s energy sector. The bond issue would further increase Moldova’s external indebtedness, whose already high level is raising some questions about Chisinau’s ability to service the debts and balance its budget. Horton advised the government to urgently to reform the gas sector and to find other methods of settling the gas bill. He warned that the IMF would postpone the resumption of lending to Moldova if those deals go through. The Fund had stopped crediting Moldova in 1997, after the preceding government had failed to proceed with reforms (Basapress, Flux, Reuters, Monitor interviews, September 23-24).