Publication: Monitor Volume: 4 Issue: 185

Moldova has taken a momentary step back from the brink of servitude to Gazprom and fiscal recklessness. Chisinau announced yesterday that it has reversed its recent consent to issue US$90 million in state obligations to Gazprom, carrying a 7.5 percent annual coupon to the Russian company over seven years, in partial repayment of Moldova’s arrears. Instead, Chisinau will ship agricultural products to Russia to the tune of US$90 million, including US$40 million directly to Gazprom and another US$50 million in produce to Russian government agencies against Gazprom’s debts to the Russian budget.

The International Monetary Fund had recently criticized the state obligations scheme for raising Chisinau’s already high external indebtedness and undermining its effort to reduce the budget deficit. The IMF also expressed reservations about the other part of the deal, which envisages transferring to Gazprom the control over Moldova’s gas distribution system. Gazprom would receive 50 percent and Transdniester 13 percent of the stock under this plan, which would leave Chisinau open to political blackmail. Ironically, Transdniester accounts for at least two-thirds of Moldova’s overall debt of more than US$600 million to Gazprom.

Gazprom’s proposals split the Moldovan government. Prime Minister Ion Ciubuc announced last week that he was about to sign the two-part deal with Gazprom chairman Rem Vyakhirev in Moscow. Yet, instead of the expected agreement, Ciubuc only signed a memorandum on the agricultural produce deliveries. Gazprom’s chief gave Moldova until November to hand over the gas sector. Chisinau says that the deadline for an answer is December (Flux, October 7).

Both sides correctly regard the proposed ownership transfer as the crux of the debt-settlement scheme. Driven by the short-term need to secure gas supplies this winter, some elements in the Moldovan government appear willing to sacrifice fundamental long-term interests. Opponents of the scheme have strong political arguments, but no one can point to a viable alternative source of gas supply at this time (background in the Monitor, September 25).