The disintegration of the USSR caused economic collapse in Moldova as well as in other Soviet republics. After 1991, the energy prices reached the world level, which affected also changes in trade relations.
Economic crisis even deepened after the separation of Transnistria in 1992, when Moldova lost a large part of its industrial capacity. In the USSR era, Transnistria was considered the most developed region of Moldova. According to statistical statements, production in the region formed one quarter of GDP in the republic, out of which industrial production was one third of total industrial output; Transnistria′s share in power production was 90 %. It was thanks to the Cuciurgan thermal power plant in Transnistria, which was the biggest one in the former USSR and Europe, with the production capacity of about 1200 MW. Thanks to its geographical situation, the main energy point of intersection is in Transnistria, and through it electric power is imported from Ukraine and Russia (1). During the USSR era Moldova used to import approximately 95 % of power from Ukraine, Transnistria (Cuciurgan) and Russia.
These unfavourable conditions as well as Transnistrian conflict made Moldova′s transition from directive to market economy even more complicated. During the economic collapse, Moldova was getting adjusted to constantly increasing prices of imported energy only with great difficulties, which caused increase of state debt and increase of energy crisis, because Moldova is not rich in energy resources. This situation subsequently resulted in deep fall of energy consumption. In 2001 Moldova′s energy consumption was the lowest one in Europe and Central Asia, i.e. approximately 51 kWh monthly (2).
Increase of prices after 1998 lead to unability of the country to pay off the expenses for the energy consumed, thus the power supplies were restricted. They were supplied only a few hours a day, natural gas and electric power supplies were often suspended without any prior notice.
A reform program was launched in 1997 in order to solve the energy crisis, highly supported by the state. The main elements of reform included:
• Development of new market-oriented power industry and amendment of legislative basis;
• Restructuralization and privatization of three of the five electric power distributing companies covering approximately 70 % of the total energy market. In 2000 they were won in a public competition by a Spanish company Union Fenosa;
• Privatization of Moldovagas gas company and paying off the debt by selling 51 % of the shares of Russian company Gazprom (Moldova owns only 35 %, other 14 % is owned by Transnistria);
• Amendment of the fees level and structure, while the fees are the same for all consumers.
After the reforms were put into effect, the fees for energy consumption have increased, state deficit has considerably lowered and the debt – especially for imported natural gas and electric power – has ceased growing. Energy sector in Moldova is a strategic sector of the national economy, on its state depends the macroeconomic stability and energy security of the country.
At present, energy security of the Republic of Moldova does not meet the international standards. The state is able to cover only 30 – 35 % of total electric power consumption from their own resources. The state secures as much as 97 % of energy resources by means of import and for this purpose it expends approximately 50 % of the total GDP, and it acquires the remaining 3 % from renewable energy resources.
Energy system of the state operates only with regional and industrial power plants with the total output of 443.5 MW. Power industry of the country includes a hydroelectric power plant with 16 MW output, a thermal power plant with 330 MW output, and a power plant at sugar refinery with capacity of 97.5 MW. At the same time the maximum consumption of electricity in Moldova is approximately 1000 MW. Moldova supplies the lack of electric power (about 70 %) by importing from neighbouring states (3).
In 2002, an agreement was concluded regarding electric power supplies from Ukraine “mixed” with Russian electric power at 50:50 rate. The price of Ukrainian electric power is 0.026 USD/kWh, the price of Russian only 0.018 USD/kWh. The advantage of this import is a relatively low average price (0.0235 USD/kWh). Average annual volume of electric power imported from Ukraine represents approximately 30 % of the total consumption. Moldova imports electric power also from Romania, but these imports are only seasonal (4).
The main source of electric power supplies for Moldova used to be the Cuciurgan thermal power plant in Transnistria, from which the country imported 40 to 60 % of the total volume of the electric power consumed. In 2001, the Union Fenosa company signed a contract with Cuciurgan thermal power plant on electric power supplies for 5 years, valued at 267 million USD. After privatization of the Cuciurgan thermal power plant at the end of 2003, the new management requested a revision of the contract with Union Fenosa.
In 2005, the Cuciurgan thermal power plant requested from Union Fenosa to increase the price to 0.0408 USD/kWh, while the original price was 0.0305 USD/kWh. As their reason they stated the increase of natural gas prices, essential for electric power production (5). The Moldovan government refused to import electric power under these conditions and decided to intensify the import of Ukrainian electric power, which is cheaper (0.0255 USD/kWh).
As a consequence to this decision, on November 1, 2005 the Cuciurgan thermal power plant stopped power supllies to Moldova. Union Fenosa began negotiations with other electric power suppliers, especially with Ukraine and Romania. At the same time National Agency for Energy Regulation stated that the first one to blame for the situation is the distributor, i.e. Union Fenosa, because they have signed a contract with an illegal economic subject which is not registered in the territory of the Republic of Moldova.
The privatization of the Cuciurgan thermal power plant took place on the basis of a public competition announced by the unrecognized government in Tiraspol (the metropolis of Transnistria). The Russian Federation companies Gazprom and RAO EES Rossii took part in the competition, yet on the auction day the majority of votes went to a Russian-Belgian company Saint Gidon Invest. However, there is no such company with Russian and Belgian interests registered in Belgian trade registers. Interesting fact is that a company with a similar name “Saint Gidon” represents a chain of shops and fashion studios in Belgium.
Despite that the company in question is registered in Russia and the subject of their business are chemical products and crude oil distribution. In 2003, the Saint Gidon Invest company agreed to sell their shares to the RAO EES Rossii company (6).
The Cuciurgan thermal power plant in Transnistria began to supply Russia with electric power since January, 2007. Throughout the whole year 2006, the RAO EES Rossii company was trying to solve the issue of power exports through Moldova. In fall 2006, Moscow gained agreement of Kishinev to provide the Cuciurgan thermal power plant with a licence to produce and export power. In accordance to Russian-Ukrainian agreement, the Cuciurgan thermal power plant was to export 200 – 800 MW of electric power a month from 2007 on (7). The power is intended for Ukrainian Odessa region, and subsequently Russia will be supplied with the same volume of power from Ukraine.
At the same time, according to the statement of the Moldovian President Vladimir Voronin, the actions of the Cuciurgan thermal power plant result also from economic interests of the RAO EES Rossii company, which exorts pressure on the Moldovan government, because it is interested in exporting electric power via the Republic of Moldova to the Balkans. However, the export cannot take place unless the Moldovan government recognizes the privatization of the Cuciurgan thermal power plant.
According to Moldavskie Vedomosti newspaper, the management of the Cuciurgan thermal power plant sent a letter to the Ministry of Industry and Infrastructure, where they expressed their willingness to supply electric power at a price 0.035 – 0.036 USD/kWh under the condition that they receive leadership for energy distribution at the capacity of 400 kW, by means of which the Cuciurgan thermal power plant wants to export electric power to the Balkans (8).
After suspending the electric power supplies from the Cuciurgan thermal power plant, the Moldovan government is trying to find other sources and to increase the potential of their own sources. At present, the main importer of electric power is Ukraine. A problem of importing from the country might occur if the consumption increases, because the capacity of distribution system between the two states is limited, which means that Ukraine is not able to import to Moldova but a certain volume of electric power.
Importing electric power from Romania is even more complicated. One of the reasons is limited distribution capacity and higher prices in comparison to Ukraine and the Cuciurgan thermal power plant. Yet despite these problems the Moldovan government is looking for energy sources mainly in neghbouring states.
Besides the new contracts concerning importing electric power that have been signed by the Republic of Moldova with Ukrenergo and Ukrinterenergo companies, a memorandum was signed as well on the construction of a power line with a capacity of 330 kW and length of 120 km on the Novodnestrovsk-Balti route. This line would enable to increase the import to Moldova. At the same time another problem can occur in connection to energy import from Ukraine, and that is an increase of prices for natural gas supplies from the Russian Federation, which will increase the prices of exported electric power to Moldova.
According to the statement of the Romanian president Traian Basescu, his country will support Moldova. At the same time he expressed his willingness to find possibilities of compensating the price difference between the real price of electric power in Romania and the price of electric power exported to Moldova. Furthermore, there is a plan to construct a power line with the capacity of 400 kW, but the problem is lack of financial resources. Therefore the Prime Ministers of Romania and Moldova turned to the European Commission and requested financial support.
Another strategy of Moldova is to increase production capacity of the three main existing thermal power plants (CET Nord in the city of Balti, CET-1 and CET-2 in Chisinau). However, the main obstacle is dependancy on natural gas supplies. (9). Thus if Russia increases the prices of exported gas, it will automatically increase also cost of electric power production. We have to emphasize that expenditure for gas purchase is about 70 % of the price of electric power.
The situation of the import of energy raw materials
As we have mentioned before, the Republic of Moldova is very poor in energy resources, therefore it imports 97 % of the total consumption of energy resources. They are imported mainly from these four states: Ukraine, Russia, Romania and Belarus, and in 2006 the import reached 96.8 % of the total energy resources supply. In 2006 Ukraine became the main supplier of energy resources with a 32 % participation. Their main articles of export to Moldova are diesel and fuel oil. The next country that follows is Romania with a participation of 31.8 %, to Moldova they export mainly diesel oil and gasoline. The third place was taken by Russia with 26 %, which makes it the main natural gas, coal and oil supplier. The next one is Belarus participating by 6.9 % (exports mainly gasoline).
In 2006, as well as in previous years, the main natural gas suppliers for Moldova were Russian companies Gazprom, which supplies the country with 42 % of the total natural gas consumption, and Gazexport, participating by 58 %. Another Russian company – LUKOIL – is the biggest oil supplier with the total participation of 40 %.
Opening of the oil terminal Terminal International Liber Giurgiulesti on October 26, 2006 was a great event in Moldova′s energy market. The Giurgiulesti port, where the terminal is situated, is the only access point of Moldova to Danube. Besides expansion of trade relations, the opening of the terminal means for Moldova also a reduction of energy dependance on the Russian Federation (9).
Via this terminal oil will be distributed through undersea lines. Import will be realized by foreign investors on the basis of the cooperation agreement. The products distributed are supposed to be fuels of higher quality and lower price. According to current agreements, this relates to oil from Azerbaijan and Kuwait, which Moldova has concluded relevant agreements with. Considering Moldovan demand, the capacity of the terminal is high – up to 1 mil. ton of diesel oil and gasoline, which covers 71 % of the total Moldovan consumption of these fuels in 2006. Fuel reserves will be used only for inner consumption.
Furthermore, there are plans to construct an oil refinery with a capacity of up to 2 mil. tons and to open a chain of 50 pumping stations around the whole territory of Moldova. The construction project of the Giurgiulesti terminal began in 1995 by establishing the Terminal company, where the state owns 41 % of shares; another 39 % is owned by Greek company Technovax and 20 % of shares is owned by the European Bank For Reconstruction and Development. Another great event of 2007 was the statement of the US Rodeco company concerning discovery of natural gas resources in the southern part of Moldova in a depth of 400 – 700 m. The company management claims that these results prove a real capacity of the country, which in the future enables to start oil and natural gas mining. It is interesting that Rodeco released the information only after 11 years of exploratory mining, when the Moldavian government gave notice of their intention to revise the company′s exclusive right to carry out the mining.
After the analysis of current situation in the sphere of electric power production in Moldova, it is obviously impossible to solve the energy crisis in a short-term period by increasing production capacity of domestic power plants and by importing from Ukraine and Romania. In both cases it could lead to lack of electric power and increasing prices. In a long-term perspective we can expect certain increase of energy security, if the construction projects of Balti and Cahul power plants are realized.
Despite that we can still expect the Cuciurgan thermal power plant to remain the main electric power supplier and the government to agree to demanded conditions. According to some experts, Moldova cannot give up this supplier, because refusing the import from the Cuciurgan thermal power plant to Moldova can cause a paralysis of the electric power distribution system in Southern Ukraine, as well as in the whole Moldova including Transnistria, as the Cuciurgan thermal power plant is not a simple power plant, but the very core of the whole energy system. Except that, as we have mentioned before, Moldovan power plants are dependant on the prices of natural gas from Russia.
In relation to energy sources in the Republic of Moldova, certain changes occured that could lower its energy dependance, especially on Russia; however, the main obstacle is insufficient amount of disponsible investments. It follows that so far Russia and Ukraine keep their position as the main energy suppliers in the Republic of Moldova. The dominant role is the one of Russia and it is indisputable that the situation in Moldova will last for a long time.
(2) Metaxa, Maia: Transnistria ameninţă cu scumpirea curentului. BBC Romanian, 1. 11. 2005. http://www.bbc.co.uk/romanian/news/story/2005/11/051031_
(2) Austrian Energy Agency, “Supply: Energy Sources”. http://www.eva.ac.at/enercee/md/supplybycarrier.htm
(3) Mîţu, Veaceslav: Despre securitatea energetică şi grija de popor. Chisinău: Monitoring Center and Strategic Analysis, 2. 12. 2005. http://www.mdn.md/clanok.php?day=2119
(4) Report No. 32876-MD, Document of the World Bank: Moldova – Opportunities for Accelerated Growth (A Country Economic Memorandum for the Republic of Moldova, Poverty Reduction and Economic Management Unit, Europe and Central Asia Region), September 9, 2005
(5) Radu, Alina: Intuneric si otrava. „Ziarul de Gardă”, Nr. 17, 18. 11. 2004. http://garda.com.md/17/investigatii/1.php
(6) Pasat, Anatol: Exporturi de electricita de la Cuciurgan către Rusa. R. Moldova va cîştiga sau va pierde? News Agency INFOTAG, 18. 1. 2007. http://www.infotag.md/comments_ro/24415/
(7) Mîţu, Veaceslav: Despre securitatea energetică şi grija de popor. Chisinău: Monitoring Center and Strategic Analysis, 2. 12. 2005. http://www.mdn.md/clanok.php?day=2119
(8) Mîţu, Veaceslav: Despre securitatea energetică şi grija de popor. Chisinău: Monitoring Center and Strategic Analysis, 2. 12. 2005. http://www.mdn.md/clanok.php?day=2119
(9) Terminalul Giurgiulesti schimba fata regiunii de sud. Info-Prim Neo, 1. 11. 2006. http://www.habitatmoldova.org/monitor.htm?lang=ro&idc=1&id=