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World Russia threatens gas supply in Europe's poorest state

07:05  27 october  2021
07:05  27 october  2021 Source:   bbc.com

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The gas shipment from Poland's PGNiG was one million cubic metres. Moldova will need much larger volumes if Gazprom does what it has threatened to do: turn off the gas taps. Up till now 100% of Moldova's gas has come from Russia . But the contract to supply it expired at the end of September. Negotiations continue. Moldovan officials say they would like to sign a new contract with Gazprom, but only if the terms are favourable. If there is no deal with Russia , could Moldova, one of Europe ' s poorest countries, buy enough gas elsewhere?

Meanwhile, Europe has been excessively relying on Russia ’ s gas supplies . However, the continent has been trying to reduce dependence on the politically-unstable Moscow and has decided to import more LNG from the United States in the coming years. However, U. S . gas supplies to Europe will only increase if the price is competitive, added the European Union. In recent years, the Henry Hub natural gas spot price had come down following new discoveries and plentiful supply in the domestic market.

His country is immersed in a gas crisis. But Nicu Popescu is trying to remain positive.

"On Monday our country made history," Moldova's foreign minister tells me. "For the first time Moldova bought gas from a source that was not Russia's Gazprom."

The gas shipment from Poland's PGNiG was one million cubic metres.

Moldova's Foreign Minister, Nicu Popescu, is trying to look on the bright side © BBC Moldova's Foreign Minister, Nicu Popescu, is trying to look on the bright side

Moldova will need much larger volumes if Gazprom does what it has threatened to do: turn off the gas taps.

Up till now 100% of Moldova's gas has come from Russia. But the contract to supply it expired at the end of September. Gazprom raised the price and Moldova balked at paying it. In the absence of a new deal, the Russian energy giant reduced supplies, prompting Moldova to declare a 30-day state of emergency. Gazprom accused Moldova of "provoking a crisis" and demanded repayment of a $709m (£514m) debt, which Moldova disputes.

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Russia has been accused of holding Europe to ransom over gas supplies in order to win approval for its Nord Stream 2 pipeline, a project that was only completed after Joe Biden lifted sanctions. Joe Biden gave the green light to a controversial gas pipeline that Vladimir Putin is now using to hold Europe to ransom by threatening to withhold supplies and push up the price of energy - unless European regulators grant the link final approval. In a move that confounded critics and supporters alike, the US President effectively green-lit completion of the billion Nord Stream 2 pipe to

Natural gas prices have been surging in Europe as demand increases globally. While this is happening with most commodities, it' s been a larger problem with natural gas . It' s due to a global economic rebound as countries lift COVID-19 restrictions and fully reopen their economies. Forty members of the European Parliament recently called on the Commission to launch an investigation into whether Gazprom was withholding natural gas to push approval of the Nord Stream 2 pipeline. A Kremlin spokesman said in mid-September that the commissioning of the new pipeline would "substantially

Negotiations continue. Moldovan officials say they would like to sign a new contract with Gazprom, but only if the terms are favourable.

If there is no deal with Russia, could Moldova, one of Europe's poorest countries, buy enough gas elsewhere?

"It's the worst time to have a gas crisis at home," Mr Popescu admits. "The prices are higher than ever. We see this market crunch on a global scale. But we've had support. In recent years Romania built a new gas pipeline into Moldova which gives us a safety valve. We've also had some advice from the European Union on how to diversify a country's gas supply within a few days."

A gas pipeline in Moldova © BBC A gas pipeline in Moldova

Like many enterprises in Moldova, the sugar factory in Drochia has been affected by the has shortage.

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European domestic gas production has also fallen sharply. But Gazprom’s critics counter that it only takes a small swing in the balance of supply and demand in commodity markets for prices to soar or sink. The key part of their argument is that supplies to north-west Europe from Russia have, on After a prolonged winter in 2020-21, gas storage in Europe was drained to lower levels than normal, so demand for supplies from the spot market to refill inventories was higher. But Europe ’ s biggest supplier has declined to make that additional gas available. With winter around the corner, storage

The Russian state -owned company Gazprom exports natural gas to Europe . It also controls many subsidiaries, including various infrastructure assets. According to a study published by the Research Centre for East European Studies, the liberalization of the EU gas market has driven Gazprom' s expansion in Europe by Part of the aim of the Energy Union is to diversify the EU’ s gas supplies away from Russia , which has already proved to be an unreliable partner, first in 2006 and then in 2009, and which threatened to become one again at the outbreak of the conflict in Ukraine in 2013–2014.

"We're able to use just a quarter of the gas we need," manager Rostislav Magdei explains. "We're topping that up with alternative sources of energy. We hope our government will compensate any losses arising from the high price of fuel."

Once in Moscow's orbit, more recently Moldova has been tilting from Russia towards the West. The country's leadership is now pro-European and supports closer ties with the EU. Many here suspect that the gas crisis is the Kremlin's way of expressing its disapproval.

"This year we had parliamentary elections and the pro-Russia party lost," says Sergiu Tofilat, former energy advisor to the President of Moldova. "We have a pro-Western party in power here. So, Russia changed its approach on the gas supply. The Kremlin wants to punish the Moldovan people for voting against a pro-Russia party. It's pure politics."

"Vladimir Putin is trying to keep former Soviet countries within the area of influence of the Kremlin. We do not want to stay on our knees in front of Moscow. We must say no to Russian blackmail and we have the opportunity now to get rid of Russian influence in Moldova."

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Russia is fully compliant with its gas supply obligations to Europe , Germany’ s energy ministry' s spokeswoman Suzanne Ungrad said Wednesday, dismissing claims Moscow is pressuring the EU to speed up Nord Stream 2’ s commissioning. “According to our information, Russia is fulfilling the Furthermore, the deputy official representative of the German Cabinet of Ministers Ulrike Demmere also stated that Russia ’ s state energy giant Gazprom is “fulfilling its obligations under the current Russian -Ukrainian gas transit agreement.” A number of politicians and analysts have been accusing

While it supplies only 1% of UK gas , Russia is the biggest supplier to Europe , accounting for roughly 40% of all EU gas . And a squeeze on European gas volumes leads to price hikes in the UK and beyond. The fact Russia ’ s Gazprom has also failed to book additional gas transit capacity via Ukraine to European destinations for October has led some to accuse the Kremlin of manipulating a crisis. “While Russia has been technically fulfilling its contractual obligations with the west, it has not been interested in capitalising on the high demand to send additional gas to its European clients.

Sergiu Tofilat, former presidential adviser, says the Kremlin is trying to punish his country © BBC Sergiu Tofilat, former presidential adviser, says the Kremlin is trying to punish his country

The Kremlin denies using energy as a weapon. President Putin recently dismissed the suggestion as "utter nonsense, drivel and politically-motivated tittle-tattle."

For Moldova, though, reducing Russia's influence won't be easy. In energy terms, Moldova is closely tied to Moscow. Not only has the country been 100% dependant on Russian gas. But its own gas company, Moldovagaz, is majority-owned by Gazprom. And more than 80% of Moldova's electricity comes from a Russian-owned power plant in Trans-Dniester - a separatist region of Moldova, backed economically, politically and militarily by Moscow.

If you think of gas negotiations as a game of poker, then Russia has a very strong hand.

But Trans-Dniester could prove to be a weak point for Moscow.

"Gazprom needs a gas contract with Moldova so that it can supply the breakaway region, too, with gas," says Sergiu Tofilat. "Gazprom is a public company, with shares listed on the stock exchange. It cannot allow itself to sign a contract with the Trans-Dniester supplier that is not officially recognised."

In the town of Bălți Moldovan motorists are feeling the effects of less gas. I see long lines at the propane station. Queuing up here are dozens of cars and disgruntled drivers.

"We're in this situation, because we're looking towards Europe", a taxi driver called Valera tells me. "If we were with Russia everything would be different."

"The problem is," says another driver Yura, "that our leaders now want to be friends with Europe and America. For cheap gas they should go to Moscow, get an agreement. We need to bow down to Russia".

For a government that has set a pro-European course there is a danger: that a prolonged gas shortage and higher energy bills could make Moldovans question the direction in which their country is moving.

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