Moldova Re-declares Energy Emergency... "Warning of Russian Gas Supply Cutoff"

[Image source=Reuters Yonhap News]

[Asia Economy Reporter Lee Hyun-woo] Moldova has declared a national energy emergency once again since last October in response to Russia's warning to cut off gas supplies. This is interpreted as a renewed threat of a gas crisis after Russia rejected Moldova's proposal to extend the gas payment deadline. Analysts believe Russia is weaponizing gas resources as one of the means to further pressure the West ahead of talks with the United States on the Ukraine situation.

According to Russia's TASS news agency on the 20th (local time), Moldova's parliament approved the government's request to declare a 60-day national energy emergency. This declaration comes just over three months after the previous energy emergency was declared last October. Russian state-owned gas company Gazprom announced it would halt gas supplies starting the 21st after rejecting negotiations to defer gas payments, plunging Moldova back into a gas crisis.

Moldova agreed with Gazprom to pay the full amount of the previous month's gas usage and 50% of the current month's gas payment by the 20th of each month, according to the revised gas supply contract effective since November last year. The gas supply price is to be set quarterly, considering oil and gas prices from the previous nine months.

However, due to the recent surge in natural gas prices triggered by the Ukraine situation, Moldova's state-owned gas company Moldovagaz has faced operational difficulties, making timely gas payments challenging. Russia's gas supply price surged from $450 per 1,000㎥ in November last year to $550 in December and $647 in January this year. However, Moldovagaz's domestic supply price remains set at $450, causing losses to balloon like a snowball.

On the 14th, Moldovagaz paid Gazprom for December's gas usage but failed to pay the full 50% of January's payment, amounting to $63 million (approximately 75 billion KRW), by the payment deadline of the 20th. Moldovagaz paid only $38 million of this amount and requested Gazprom to defer the remaining $25 million, but the request was rejected.

With the emergency declaration, the Moldovan government plans to expedite gas payments by providing measures such as VAT deferral and emergency fund support to Moldovagaz for January and February. However, given Moldova's weak economy, which ranks among the poorest in Eastern Europe, and the impact of COVID-19, securing payment funds is expected to be difficult.