DiXi Group round table discusses threats to Ukraine’s and Moldova’s energy security

09 September 2019

The main contracts between Gazprom and the Ukrainian and Moldovan parties expire at the end of 2019. Given the absence of clarity as regards the terms of new agreements and even desire of Russia to negotiate seriously, chances that we’ll see a new episode of the "gas wars" are increasing every day. “If negotiations will continue in the conditions of crisis, they could use various methods and instruments to force Ukraine to sign a contract on Russian terms, just like it happened in 2009,” Olena Pavlenko, DiXi Group President said.

DiXi Group analysts pointed out that Russia has long been using gas as an instrument of exerting political influence, so European countries should take more seriously the risks mentioned in the study presented during the round table. “This study offers certain conclusions about how that could happen and, most importantly, how to frustrate Moscow’s political energy policy,” DiXi Group expert Denys Nazarenko said. “A comparative analysis of the regional study reveals that in the case of Romania and Hungary, which are both EU member states and which are much more integrated into the common energy market, dependence on Russian energy sources is much lower and the following of the Energy Community’s principles shows significant positive dynamics in energy security comparing with the similar study made two years ago. On the other hand, in the case of Ukraine, Moldova and Georgia, high degree of dependence and weaker institutions translate into greater influence from Russian capital, oligarchs and corruption. Recommendations in this regard include acceleration of anticorruption and liberal reforms in each of those countries with simultaneous acceleration of integration into the EU’s common market.”

Moldova’s situation is more serious: stronger influence from the Kremlin and worse technical connection to the EU’s gas market make the matter of Russian gas delivery a matter of national security.

Experts from Romania and Moldova also participated in the round table via Skype. Moldova could receive gas from Romania, but at present, it is technically impossible. The construction of an interconnector between the two countries still continues and may take a while to finish. “I’m not sure whether we could deliver gas to Moldova even after construction of the interconnected network will be completed, whether we’ll have gas for sale … It is quite possible that in the nearest future, Romania itself would have to count on either Ukraine or Europe,” Ana Otilia Nuțu, an expert at Expert Forum (Romania) think-tank said.

The gas issue in Moldova is significantly affected by the internal political situation and the approaching election. According to Denis Cenușa, an expert at Moldovan Expert-Grup think-tank, talks with Russia are conducted simultaneously by President Igor Dodon and by the Ministry of Economy. “I have an impression that Gazprom and Russia want to talk about it with the president, not with the ministry responsible for this sector, even though according to the Constitution, energy policy is not his area of responsibility. The government, as well as civil society, understands the risks of the situation which we may find ourselves in if Ukraine, Russia and the EU won’t reach an agreement among themselves. But we have long been aware of that risk,” Denis Cenușa said.

Five years of pro-European government and the progress (albeit insufficiently fast) of economic reforms, particularly in the gas market, allowed Ukraine and Naftogaz of Ukraine to take full advantage of financial assistance from the European Union and international financial institutions. Thanks to this assistance, Naftogaz is able, even in the conditions of serious problems with payments for gas delivered inside the country, to pump gas into storage reservoirs in summertime, using borrowed funds, as part of the preparation for a heating season. In addition, it becomes technically possible thanks to the country’s functional, even if imperfect and overall modest, connection to the European Union’s gas network and gas market. Another, potentially the most important factor that could turn Ukraine’s situation for the better is the unambiguous political stance of not accepting nontransparent bilateral arrangements with Gazprom in exchange for certain discounts on gas price. Instead, Ukraine consistently sticks by its choice of being a player in the international gas market on general terms and in a competitive environment.

The Moldovan party could be recommended to accelerate technical connection of the country’s central region with Romania via the Ungheni-Chișinău gas pipeline, in particular, by intensifying the dialogue with the Romanian party who has greater control over the construction process; urgently find the necessary financing to procure gas reserves and discuss with Ukrtransgaz the terms of storing it in Ukraine’s underground gas reservoirs; and develop a uniform political stance among all government bodies as regards the terms of doing business with Russia and Gazprom.

Full text of the study War by other means. Kremlin’s Energy Policy as a Channel of Influence. A comparative assessment. Case studies from Ukraine, Moldova, Georgia, Romania and Hungary

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