Weekly Roundup

October 16 - 22

Welcome back to Moldova Matters! In this weekly roundup we will check in with the top stories of the week in Politics and Economics. Subscribe to Moldova Matters to get our Weekly Roundup and other content sent right to your email! And consider becoming a paid subscriber to support our work at Moldova matters. For just $5 / month, the price of a nice coffee, you can support this work and help us expand into even better content!

Moldova’s Energy Crisis

This week, the primary story in Moldova is the loming gas (natural gas) and energy crisis as cold weather sets in. As we discussed in the last Weekly Roundup, this crisis is rooted in a Europe-wide gas shortage and skyrocketing prices ahead of the winter cold season. Critically, Moldova’s contract with Russian energy exporter GazProm expired this month and the government has been in negotiations attempting to extend the contract without huge price increases. Leading this process is Minister of Infrastructure and Regional Development Andrei Spinu supported by Deputy Prime Minister for Reintegration [with Transnistria] Vladislav Kulminsky and Head of MoldovaGaz Vadim Ceban. The involvement of Deputy Prime Minister Kulminsky highlights the role that Transnistria plays in these negotiations with Russia as they are a gas transit point and Russia has repeatedly attempted to blackmail Moldova in the past over various Transnistria issues in gas negotiations.  The week unfolded with numerous conflicting stories and a fairly chaotic presentation of the situation and next steps. Let’s dive in. 

What’s Moldova Doing to Economize?

One aspect of this story is how Moldova is planning to economize on natural gas usage and prevent a shortfall in supply. Last week we discussed how the Minister of Education was reportedly considering remote schooling in order to economize on school heating. This week the Ministry refuted this reporting saying that in fact there were no such plans. This is one of many reversals or miscommunications in this story. 

Meanwhile, the Head of MoldovaGaz gave a press conference this week asking people to economize. He suggested not boiling a whole pot of water for a single cup of tea and reducing heating temperatures through the night. He said that “you don’t need to walk around your house barefoot and in shorts during the winter!” Additionally, he suggested that companies should look for gas alternatives as well. 

Meanwhile, the heating season starts on October 22nd this year. Basically, this refers to apartment buildings and government buildings that still operate with the central heating systems left over from Soviet times. Once temperatures sink to a certain average low each year the central system is turned on and all these buildings are heated throughout a community. Minister Spinu has announced this week that Termoelectric, the state enterprise responsible for central heating, has successfully moved to backup energy in the form of fuel oil and as such will not face disruption in the case of a gas shortfall. 

So What’s the Status of Negotiations?

Good question. Frankly, it’s very confusing. In broad strokes we know that the government is working in parallel on two problems in two directions. Problem 1 is the price of gas. The stated goal of negotiations with GazProm in Russia is to keep the price from exceeding the contract from last year. Problem 2 is supply. Basically, this means having enough gas to keep the lights on and heat flowing regardless of price. 

In addressing these 2 issues, negotiations are ongoing in 2 directions as well. Firstly, with GazProm and Russia and secondly with neighboring countries and European partners. Since European countries buy gas predominantly from Russia and transiting it back to Moldova adds cost on top of their already sky high prices we can basically say that those negotiations are more about supply than cost. Meanwhile, the negotiations with Russia are about both cost and supply since buying direct is both the cheapest and simplest way of getting gas. 

No while we can parse this information from the reporting, the actual status of negotiations is unclear. It is made worse by conflicting statements made through the week. For example, the Head of MoldovaGaz stated that price isn’t really an issue. He noted that prices are up all over Europe and Moldova will have to pay a lot more… but that the real problem is getting any at all. He suggested that the fight is first for volume of imports and then for price. In this press conference he suggested that maintaining a variable rate from Russia is probably the short term solution meaning prices will remain around 5x higher than last year as they are now. Meanwhile, Minister Spinu this week has said that there are multiple paths to get gas to Moldova from neighbors other than Russia and that volume will not be a problem. The main issue he says is cost. So is the problem cost or volume? Well it depends on the person and the day. The best answer probably is “both.”

Negotiations in Europe

This week, Minister Spinu traveled to Poland to negotiate a potential gas purchase. During this visit he had meetings with various political leaders as well as the head of the Polish state gas company. When he returned there was no concrete announcement of a plan but he gave a press briefing outlining the technical possibility of buying gas from Poland. In theory, gas could be piped to Ukraine and held there in tanks or piped directly to Moldova. Minister Spinu said that this means that supply is not the problem but price and that he intends to create a tender mechanism to try and find the best price options for Moldova. This was treated skeptically by many as the technical feasibility of the Polish route may be there but the idea that it would be economically feasible is another question. 

Meanwhile Romania’s Interim Minister of Energy (the Romanian government collapsed this week) says that fuel oil can easily and readily be provided to Moldova. He noted that Romania’s own production capacity exceeds local needs and easily covers Moldova. Fuel Oil generally refers to heavy products derived from crude oil and is a backup for Moldova’s central heating and electrical generation systems. It’s dirty and non-ideal but if used widely would cut down the need for gas reducing the volume problem. 

Negotiations with Russia

Early this week Deputy Speaker of Parliament Mihail Popșoi said that Dmitry Kozak, head of the Russian Presidential Administration and Putin’s “fixer” was coming to Chisinau along with leaders from GazProm to negotiate. A date was not set but they accepted the invite to come negotiate. Oops, actually no. It was soon after reported that Mr. Kozak actually declined the invitation and was not coming. Then it was announced that Minister Spinu and Deputy Prime Minister Kulminsky as well as the Head of MoldovaGaz would themselves head to Moscow for negotiations. The presence of Deputy Prime Minister for Reintegration Vladislav Kulminsky in this trip highlights the Transnistria angle. Earlier this week Prime Minister Gavrilita spoke with the President of the seperatist region Vadim Krasnoselsky on the issue of gas. During the discussion, he brought up the fact that Transnestrians are no longer allowed to drive in Ukraine on their license plates and that the Sheriff Football team cannot access it’s winnings from the Champions League because Moldovan banks are blocking access to foriegn currency accounts for some Transnestrian companies. Clearly this implies that Transnistria sees various other bilateral issues as linked to the gas issue because of the leverage Moscow holds over Chisinau. 

While officials are in Moscow to continue negotiations, it was announced that the current variable price contract was extended another month. 

State of Emergency

On Friday, Prime Minister Natalia Gavrilita announced that she would be asking Parliament to declare a State of Emergency due to the energy crisis. She announced that negotiations between Minister Spinu, Deputy Prime Minister Kulminsky and Dmitry Kozak are ongoing but that they have failed to reach an agreement. The Prime Minister said that there is no final agreement and “no confidence” that they will be able to reach a final agreement. She explained that while GazProm had extended the temporary contract through October, they did not provide the necessary volumes to fully supply Moldova and that incoming gas only accounted for around 67% of required demand. Because of this MoldovaGaz had failed to balance line pressures and the system is reaching a critical level today. The Prime Minister noted that failures in the pressure system mean that starting now gas may cease to flow in some areas of the country. The purpose of the State of Emergency is to bypass legal requirements on purchasing and procurement in order to make emergency contracts with other suppliers and for the government to allocate emergency funds to manage these contracts. 

Wow, we’ve talked about gas for a Loooong time today… what does this mean?

First and foremost, this is a true crisis. Time is short to find a solution and failure to do so would mean huge portions of the population going cold as winter approaches - not to mention the shutdown of various industries. The new government is being tested and has had to throw considerable resources, both human and financial, into finding solutions. While the reporting this week has shown contradictory statements and a lot of confusion it’s not clear how much of that could be avoided given the technical and geopolitical complexity of the issue. Meanwhile, society seems split in its understanding of the crisis with some people discussing it in the context of a European wide problem and others squarely blaming Moldova. This week, a group of 37 NGOs in Moldova called on Gazprom to stop “blackmailing” Moldova, an action that highlights just how politically sensitive this issue is. We’ll see how things develop in the coming weeks as the cold season officially starts. 

Political Updates

This week, politics has been dominated by talk of the energy crisis. But in addition to this important topic everyone is talking about a major political resignation in the country - Pavel Filip has retired as the leader of the Democratic Party! Just kidding. While he did retire, absolutely no one took note as the slow vanishing of Plahotnuic’s Prime Minister is fairly irrelevant. The actual resignation that has garnered headless was that of Igor Dodon who resigned his post in Parliament this week. Mr. Dodon announced that he did not think it was useful for him to serve in Parliament anymore and that having to go to all those pesky legislative meetings was a waste of his time. Instead he plans to focus on building cultural and business ties with Russia outside of parliament and he took a position as the leader of the Moldovan-Russian Business Union. Mr. Dodon stressed that he was not leaving the Socialist Party but noted that at the Party Congress in December he would not stand for another term as Party Chairman. But this was not portrayed as a retirement. Instead Mr. Dodon suggested that he would motion for the abolition of the Party Chairman position entirely and instead suggest the formation of a 5 person Executive Committee that would elect from its own membership an Executive Secretary. A “First Secretary” you say? Yes, the idea that this sounds a lot like a politburo was not lost on social media. Meanwhile Mr. Dodon also suggested that he might become an “Honorary Chairman” of the party though what that means was left unsaid. Finally, he stressed that he isn’t retiring from politics and that he has no intention of fleeing the country… something he says quite often these days.  

Daylight Savings Time is Coming...

Finally, in minor political news the government found time this week to consider the possibility of abolishing daylight savings time in Moldova. After a high level meeting chaired by the Prime Minister it was decided not to do so and that the time change will continue at the end of October as planned. For context, the European Parliament approved a bill in 2019 to abolish daylight savings time throughout the union by 2021. The goal was that each country would decide whether it wanted to stay on summer time or winter time and announce the change by this year. This didn’t really happen country by country and Moldova has decided on a “wait and see” approach while Europe builds some kind of consensus on the issue. So for now, time change is coming just like normal. 

COVID-19 Update

The situation continues to worsen in Moldova with a 7 day average of 1558 daily new cases and 34 daily deaths in the last week. This puts Moldova very near to the March 2021 peak in new cases and shows just how rapidly the Delta wave continues to spread through the country. 

The Minister of Health discussed the current situation basically highlighting that things remain quite bad and are getting worse. She noted that Chisinau and Balti lead infections in Moldova and that across the country hospital resources are 90% in use at this time. There is the possibility of adding 1000 more beds but the Minister noted that this would put a terrible strain on the health system even beyond what is already going on. Vaccination in Moldova has stagnated with just 24% of the public fully vaccinated. Considering estimates of citizens also holding Romanian passports who got vaccinated there this number may be as high as 30% but no more. The WHO has noted that this is a major problem and pledged to support vaccination drives with a goal of hitting 40% by the end of the year and 70% by mid 2022. Given that supply is no constraint there are precious few details on how the Minister or WHO plans to overcome vaccine skepticisms and anti-vax sentiments to accomplish these goals. 

The fact that vaccinations are stagnating is a sign that the “vaccinated only” restrictions on restaurants and other establishments aren’t working to drive vaccination rates. Or at least not yet. 

Romania is in Dire Straights

While Moldova is doing poorly, Romania is doing much worse. Last week Moldova was 6th in the world in terms of COVID deaths scaled by population. Romania was number 1. The country appealed to its international partners for help saying that hospitals are completely full. They are transferring some patients to Hungary and have received ventilators, oxygen systems, tests and other equipment from Denmark, Italy, France and Germany. But they need doctors urgently.  

The Moldovan Ministry of Health has announced that 22 Moldovan doctors and medical staff will be sent to Romania to help with their COVID surge. The Ministry of Health noted how Romania has been an indispensable friend to Moldova during this pandemic and that it is an honor to do our part to help them in return. In a sendoff ceremony for the doctors, Prime Minister Gavrilita said the following: “Romanian hospitals are overwhelmed with coronavirus patients. In this difficult situation, the Moldovan government offers assistance. We understand that we need to join forces and help the Romanian healthcare system. Solidarity and responsibility are extremely important now”

Compounding the problem is Romania’s current political crisis that led to the collapse of their government this month. Noting their inaction, President Iohanis moved unilaterally to impose new restrictions. Schools are closing for 2 weeks and vaccine certificates will be required for most actions - including driving after a nightly curfew.  

It’s important to understand the level of crisis in Romania, the worst since the beginning of the pandemic, because of the potential for something similar in Moldova. Both countries are currently projected by the University of Washington to be closer to the beginning than the end of this wave (model link in English). Both countries are expected to be in this wave until sometime in January. 

Economic News 

This week, the government released various statistics showing broadly that the economic situation in Moldova has deteriorated in the last year. Absolute poverty was recorded at 26.8% in 2020, a number 1.6% higher than 2019. This was largely driven by an increase of poverty in the cities likely driven by the pandemic crisis. Furthermore, reports noted that rising prices are putting pressure on people with low incomes. Food prices are up 6.6% and the cost of firewood - the primary heating option for people without gas has risen. The gas crisis will only increase these concerns. 

In order to control one price problem, PAS deputies made proposals this week designed to curb the rise in gasoline prices throughout the country. The deputies proposed a moratorium on the construction of new gas stations in the country. Moldova currently has the 3rd most gas stations relative to number of cars in Europe (behind Greece and Latvia). MPs say that there are too many gas stations due to a flawed regulatory system. This results in lower sales and higher prices at all the stations to manage. Additionally, the proposed to change the licensing mechanism for fuel imports to Moldova. Currently, there is a 260,000 lei per year ($14,500) fixed fee for an import license. Deputies would like to move to a 10 lei / ton variable import tax instead. This would allow smaller companies to get into the importing business and curb monopoly behavior occurring right now due to the high fixed rate fees. 

From Crisis… Opportunity!

As we’ve noted, all this economic bad news is not limited to Moldova but comes in the context of a European crisis or two. One other major issue in Europe is a massive supply chain crunch driven by the pandemic. From this crisis a new Moldovan startup smells an opportunity to reimagine logistics in a digital age. The company is called Qoobus and bills itself as “Uber for logistics.” The idea is pretty simple, currently truck drivers and shipping companies work like taxi companies used to - there’s a central dispatcher with a paper and pegboard system to plot routes and schedule shipments. Worse than taxies though, these shipments often pass multiple jurisdictions so a single order may go through as many as 3 dispatch centers - all charging a fee. Qoobus is basically a matching system for shippers and clients to arrange orders online without the middle men. The company currently operates throughout Eastern Europe and is the most popular shipping network in Ukraine, Belarus, Lithuania, Latvia, Estonia and Kazakhstan.  Qoobus recently raised $500,000 from a Cezck investor and has plans to further expand including into its home country of Moldova… which they note is hard because Moldovans are very resistant to digital solutions. So while the world is convulsing in multiple economic crises, it’s nice to know that innovative Moldovan entrepreneurs are jumping into the breach with solutions - bravo!

Crime and Corruption

The disgraced journalist Natalia Morari is back in the news this week as she apparently attempts to take her seat back on the TV8 Board of Directors. Morari resigned her place on the board on September 20th after the revelations that she concealed her relationship with alleged criminal Vladislav Platon as well as the child they had together. Now, Morari is suing TV8 claiming that she resigned due to “psychological pressure and blackmail” in an attempt to regain her board seat. The TV8 Board categorically rejects this claim. The suit was filed on October 11th and noted by the press on October 18th when the court dismissed the case. The dismissal was noted on the court’s website but no reasoning was published at that time. Two days later, on October 20th the court website was updated with the case status listed as “under consideration” with no explanation given for the change nor acknowledgement that the case was previously listed as dismissed.  Morari published a statement saying that she intended to take back control of the media company she founded and accused the rest of the TV8 board of illegal actions and blackmail. She said that all these actions were taken because the “man she loved, the father of her child” had left the country (fled the country actually) and that SIS agents had begun to blackmail her. What’s going on? That’s anyone’s guess at this point. But it seems we have not seen the last of Natalia Morari. 

Ending on a High Note!

Wow, a bit tough to find a high note this week. It’s been a fairly depressing week of news honestly with the energy crisis largely blotting out the sun. So let’s try this for a change - post your own high notes for the week, from Moldova or otherwise! Leave a comment and let’s cheer each other up with some good news from our subscribers!

And consider becoming a paid subscriber to support our work at Moldova matters. For just $5 / month, the price of a nice coffee, you can support this work and help us expand into even better content!