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Energy challenges in Moldova: state of emergency and Azerbaijani gas

16 December 2024

From January 1, Ukraine will not be a transit country for Russian gas

Energy challenges in Moldova: state of emergency and Azerbaijani gas

From January 1, 2025, Ukraine plans to completely abandon the transit of Russian gas. This year, a series of stress tests have already been conducted for the Ukrainian gas system to check how it will work in such conditions. This statement was made by the head of the Ministry of Energy, Herman Galushchenko, on Wednesday, December 11, at the 7th German-Ukrainian Business Forum.

Ukrainian Energy found out whether everything is so simple with the termination of transit.

Europe is ready

The European Commission estimates that the termination of the transit of Russian natural gas through Ukraine will have a minor impact on gas prices in the EU. This issue has already been taken into account by European gas markets, and the region has the ability to find alternative sources of supply, Bloomberg reports, citing a European Commission document.

"Given that the world produces more than 500 billion cubic meters of liquefied natural gas annually, the replacement of about 14 billion cubic meters of Russian gas that was supplied via Ukraine will have a negligible impact on natural gas prices in the EU. The termination of the transit agreement is already reflected in winter gas prices," the European Commission document states.

The Commission emphasizes that member states that still import Russian gas via Ukraine, in particular Austria and Slovakia, will be able to abandon these supplies without significant problems. At the same time, the EU does not plan to participate in negotiations on the continuation of transit. Instead, gas buyers from Slovakia and Hungary continue consultations, including a proposal for exchanges between Azerbaijan and Russia.

Gas "needle"

On December 11, the Austrian company OMV terminated the contract for the import of Russian gas, which was supposed to be valid until 2040. The company immediately explained that this was due to Gazprom's violation of its contractual obligations.

From November 16, 2024, the Russian company stopped supplying gas to OMV after the Austrians forcibly collected 230 million euros from it, counting the October gas supplies against Gazprom's debt.

OMV said that it has alternative sources of gas supply to Russia: its own production in Norway and Austria, other gas producers, as well as long-term volumes of liquefied natural gas (LNG).

OMV's gas storage facilities in Austria are currently about 85% full, so the Austrians feel quite free to put forward conditions to Gazprom.

"Thanks to the successful efforts of our gas team over the past three years, OMV is well positioned to leverage our diversified portfolio of alternative gas sources, ensuring security of supply for our customers," said Alfred Stern, CEO of OMV.

OMV has been buying Russian gas since 1968 and continued to import it even after the start of the full-scale war in Ukraine. OMV previously received about half of all Russian gas transited by Ukraine.

Companies from Hungary and Slovakia are close to signing a contract to supply 12-14 billion cubic meters of gas per year from Azerbaijan, Bloomberg reported.

Azerbaijan will use the same pipeline network that currently transports Russian gas through Ukraine to the European Union.

These supplies will effectively replace the existing ones that Europe currently receives under the transit agreement. The contract is expected to include a so-called swap agreement between Azerbaijan and Russia, as Azerbaijan does not have enough export capacity to replace existing supplies.

Under the new deal, Azerbaijan’s state energy company Socar will supply gas to Suja on the Russian-Ukrainian border. Hungary’s MVM Zrt and Slovakia’s Slovensky Plynarensky Priemysl AS will then take over management and deliver it to Europe. Any commercial deal would require political support from the Ukrainian authorities to allow the country’s gas network operator to reserve capacity.

However, such an outcome is still at the negotiation stage, and the Ukrainian side has not yet commented on whether it will agree to the transportation of Azerbaijani gas.

Volodymyr Omelchenko, director of energy programs at the Razumkov Center, explains that there will not be enough Azerbaijani gas for the Europeans.

“Even under the conditions of concluding a contract for the transportation of Azerbaijani gas through the Ukrainian gas transmission system, no one will be able to control which gas will continue to be supplied to Europeans – Russian or Azerbaijani. It is no secret that Russian Gazprom is currently worried about the loss of Ukrainian capacities and 6 billion euros – in conditions of war and genocide, this is even very useful for Ukraine,” says Omelchenko.

In contrast, in the summer, Azerbaijan accused the EU of treating the country as a “firefighter”, concluding only temporary gas agreements, despite requests to increase fuel exports to the region. Azerbaijani Ambassador to the EU Vagif Sadigov said that Baku needs long-term contracts to attract the financing necessary to expand gas production in the Caspian Sea and meet growing demand in Europe, writes the Financial Times.

Sanctions in force

Bulgaria may stop transporting Russian gas to Serbia via the TurkStream gas pipeline if Russia's Gazprom Export fails to find a way to pay for its transit in December, said the acting Bulgarian Energy Minister Vladimir Malinov. This was reported by the Bulgarian publication Mediapool.

Bulgartransgaz is fulfilling its contractual relations on time and with the required quality. From now on, the function of Gazprom Export, which reserved capacity and made payments through Gazprombank, is to find a solution if it wants to continue receiving the service," the minister said.

He recalled that the US sanctions regime, which Gazprombank was subject to, has a transitional period, but the transit of Russian gas through the territory of Bulgaria to Serbia was paid for only in December. Therefore, Gazprom Export has until December 20 to resolve the problem.

"We are waiting for a proposal from Gazprom Export. There is no solution yet. These are bilateral relations on a contractual basis. Of course, Bulgartransgaz will strictly fulfill its contract and will stop natural gas transit if the service is not paid for,” Malinov said.

Sanctions against Gazprombank and six of its foreign subsidiaries were imposed by the US Treasury Department on November 22.

Revenues from transit to Serbia make up a significant part of the revenues of the state-owned Bulgarian gas transmission operator.

The company’s data for the first half of 2024 show that the transportation of natural gas to Serbia increased Bulgartransgaz’s net profit by 196%.

It amounted to 173.71 million Bulgarian levs ($93 million 522 thousand, at the current exchange rate of 1 lev = 0.54 US dollars), which is 58.6 million more than a year earlier.

Transit to Serbia increased by 39.45% compared to the same period last year.

After signing the transit contract to Serbia (from January 1, 2022 to the end of March 2024), Bulgartransgaz's total profit amounted to 1.3 billion Bulgarian leva.

To shake up Moldova

Realizing that Europe can do without Russian gas, the Kremlin is not giving up on attempts to shake up its closest neighbors, such as Moldova.

The Moldovan government is asking the parliament to introduce a state of emergency from December 16 for a period of 60 days due to the situation with gas supplies.

At the same time, Energy Minister Victor Parlikov was dismissed.

This is reported by the Moldovan TV channel TV8.

The resignation of Energy Minister Victor Parlikov is explained by managerial errors that led to a critical situation.

Parlikov recently traveled to Russia, where he met with the head of Gazprom. It is known that they talked about the continuation of gas supplies in 2025 after the cessation of transit through Ukraine. In addition, they talked about Moldova's debt for Russian gas. He did not report any specific agreements on gas supplies to Transnistria after 2024 based on the results of the negotiations.

Moldovan Prime Minister Dorin Recan also warned about the possibility of a partial or complete cessation of energy supplies.

Gas consumption in Moldova is relatively small - up to 3 billion cubic meters per year. A third goes to the right bank of the Dniester, the rest - to the left. The cessation of gas transit through Ukraine will primarily affect the left bank - Transnistria, where the Moldovan Power Plant (MDRES) is located, which supplies electricity to the entire country.

The right bank of Moldova, the Ministry of Energy of Moldova reported, has stopped consuming Gazprom's natural gas since November 2022, when the Russian Federation "unilaterally, contrary to the contract between Gazprom and Moldovagaz", limited supplies to Moldova to 5.7 million cubic meters of gas per day. At the same time, the government decided to leave all this volume of gas for consumption by the Transnistrian region, including the power plant in Dnistrovsk.

For the right bank, gas supplies were diversified through purchases from various traders and its transportation via different routes.

If supplies are stopped, the Transnistrian region may find itself on the verge of a humanitarian catastrophe.

"Given the fact that there are Russian armed forces, weapons and ammunition depots in the region, as well as the fact that we purchase a significant part of our electricity from MDRES, we do not want to destabilize the region and will not prevent Gazprom from continuing to supply gas to Transnistrian region,” the country’s Ministry of Energy reported.

At the same time, the so-called “president” of unrecognized Transnistria, Vadim Krasnosilsky, also decided to adopt a decision on rationalizing natural gas consumption and banned the export of energy resources. In addition, for the duration of the state of emergency in unrecognized Transnistria, the right to private property and work may be restricted.

An interesting point – in November, after the Russian Federation’s attack on the energy sector, the Odesa region turned to Transnistria for help, but was refused. This was reported by the head of the Odessa OVA, Oleg Kiper.

He stated that the Odesa region requested additional capacity from unrecognized Transnistria, on whose territory the Moldovan GRES is located, but was refused.

Direct blackmail

Meanwhile, another pro-Russian enclave that the Kremlin is trying to influence has been left completely without electricity – Abkhazia.

Residents of Russian-occupied Abkhazia have had their electricity cut off – the Inguri hydroelectric power station has been shut down due to a lack of water. The local company Chornomorenergo reported this on December 11.

According to the published schedule, electricity will be turned on for subscribers from 07:00 to 21:00 for only 1 hour and 24 minutes.

Earlier, Chornomorenergo reported the forced suspension of the Inguri hydroelectric power station due to a “critical water level in the reservoir”.

The occupation administration reported that the situation could worsen if funds are not found to pay for Russian electricity.

Abkhazia is a territory of Georgia occupied by Russia. The region declared “independence” from Tbilisi in the early 1990s. Since then, the territory has been under Russian control.

Since October 2024, the Abkhazian "parliament" has been discussing an investment agreement with Russia, which caused a wave of protests - then demonstrators occupied government buildings and demanded the resignation of the "head" of the occupation administration of Abkhazia, Aslan Bzhania. He later fled to the Russian Federation.

On December 5, the "parliament" refused to ratify the agreement. The Abkhazian "authorities" viewed the project as a stimulus for the local economy, while its opponents consider the agreement a "direct surrender of interests" of Abkhazia.

"Russia has stopped financing the maintenance of the unrecognized state and no longer supplies it with electricity. This is how the Abkhazians are being retaliated against for not wanting to give their land to Russian oligarchs for development and plantations. The situation could probably have been better if in previous years they had developed alternative energy in Abkhazia, installed solar panels and windmills. But no one did anything. It was beneficial for Russia to maintain the complete dependence of this territory on its own infusions. And somehow no one in the Russian Federation is shouting about the “blockade of Abkhazia” anymore, as before, when there was a different government in Georgia. Or as they shouted about the “blockade of Donbas”. Now the suffering of the Abkhazians does not bother anyone and causes only mischief among the Russians. This is a different blockade! This is the right blockade!” - this is how blogger Denis Kazansky commented on the situation in Abkhazia.

Olena Marchenko, specially for “Ukrainian Energy”


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