242476 1/5/2010 13:22 10CHISINAU5 Embassy Chisinau CONFIDENTIAL VZCZCXYZ0000 RR RUEHWEB DE RUEHCH #0005/01 0051322 ZNY CCCCC ZZH R 051322Z JAN 10 FM AMEMBASSY CHISINAU TO RUEHC/SECSTATE WASHDC 8733 INFO RUEHKV/AMEMBASSY KYIV 0658 RUEHBM/AMEMBASSY BUCHAREST 4356 RUEHMO/AMEMBASSY MOSCOW 3288 C O N F I D E N T I A L CHISINAU 000005
STATE FOR EUR/UMB
E.O. 12958: DECL: (##) TAGS: ECON, ENRG, ETRD, PGOV, MD SUBJECT: MOLDOVAGAZ PRESIDENT GUSEV TALKS BUSINESS
Classified by: Charge d'Affaires Marcus Micheli for reasons 1.4(b) and (d)
1. (C) SUMMARY: In a December 22 meeting, Moldovagaz President Alexander Gusuv told Pol/Econ Officer that the new Government of Moldova (GOM) no longer interfered in his company's business as the previous GOM had done. Gusev said recent meetings with Ukrainian representatives -- on the eve of a trip to Moscow to sign the annual gas supply agreement with Gazprom -- had indicated that there would be no interruption in gas supplies in 2010. He also explained that Moldovagaz and the National Agency for Energy Regulation (ANRE) had recently instituted a simplified methodology for calculating domestic prices of Russian gas. Gusev also expressed growing concern about the poor maintenance of gas pipelines in Transnistria and said he saw no foreseeable alternative to Russia for Moldova as a source for gas. END SUMMARY
WORKING WITH THE NEW GOM
2. (C) In a December 22 meeting, Moldovagaz President Alexandr Gusev said that working with the new Alliance for European Integration (AIE) GOM was easier than with the previous Party of Communists (PCRM)-led government because the authorities no longer intervened in his company's internal affairs. Gusev explained that the new GOM did not give instructions on whose gas supply needed to be disconnected or reconnected or who must pay bills and who might be allowed to be delinquent in making payments (Note: all of which happened under the previous government). Gusev also noted a recent problem in the city of Balti in which Moldovagaz and the local gas company disputed the ownership of land and a pipeline on the property. The two companies eventually resolved the issue, leaving the assets with Moldovagaz. (Note: The mayor of Balti is pro-PCRM and the dispute may have been an effort by the local gas company to claim assets with local political support. End note).
GAS FROM RUSSIA AND UKRAINIAN TRANSIT THIS WINTER
3. (C) Recently, Gusev said, he had visited Ukraine where he had discussed the natural gas supply situation for the winter with his Ukrainian counterparts. Gusev indicated that he was optimistic that there would be no interruption in gas supplies in 2010 because Russia and Ukraine had taken steps to prevent a repeat of the crisis of January 2009. On December 23, Gusev traveled to Moscow to sign the annual agreement with Gazprom for natural gas deliveries to Moldova, including Transnistria, and gas transit through Moldovan territory to Turkey, Romania, Bulgaria, and Greece. In the December 22 meeting, Gusev said that one goal of the meeting in Moscow would be to determine the projected annual volumes of the gas Gazprom would supply. According to Gusev, in the first quarter of 2010 the gas acquisition price for Moldova was expected to be USD 233 per 1,000 cubic meters. This would be 21 percent higher than the current price of USD 192 for the fourth quarter of 2009. The final price would be calculated sometime around January 15, 2010, Gusev added.
CHANGES IN GAS PRICE METHODOLOGY
4. (C) Gusev said that Moldovagaz had asked the National Agency for Energy Regulation (ANRE) to approve a new natural gas tariff and was pleased the regulator had agreed to amend the methodology for calculating domestic tariffs following recommendations from the gas company. According to Gusev, the revised methodology now completely separates the calculations for the domestic gas tariff and the transit charges for gas passing trough Moldovan territory. This new methodology was an important improvement and simplification, Gusev said. The previous methodology intertwined
the two actions. Gusev welcomed a second adjustment that provided Moldovagaz with cost recovery for previous investments, noting that the company will be able to adjust tariffs from 5 to 14 percent to recover the costs of investments.
TRANSNISTRIA NOT MAINTAINING PIPELINES
5. (C) Referring to relations with Transnistria and Moldovagaz's inability to access its infrastructure, Gusev mentioned the two gas pipeline explosions that occurred in 2009, one on the right-bank of the Nistru River and another one on the left-bank in Transnistria. Moldovagaz had no access to its facilities on the left-bank of the Nistru River and therefore it could not inspect and conduct maintenance on the entire pipeline in order to keep it in good working order, Gusev explained. According to Gusev, there are three branches of the pipeline passing through Transnistria that were built in 1974 and might have deteriorated substantially. Clearly frustrated with the Transnistrians, Gusev noted that Gazprom and Moldovagaz might face a situation in future when the pipeline could not be used or transit could be severely reduced. (Note: In addition to blocking access for Moldovagaz to its infrastructure in Transnistria, the regime in Tiraspol has accumulated a debt of almost USD 2 billion to Gazprom which is legally a Moldovagaz debt. End note.)
NO ALTERNATIVE ENERGY SOURCE
6. (C) There was no alternate to Russian gas for Moldova, Gusev said, when asked about alternatives to Gazprom. In theory, he noted, if the Nabucco pipeline went through Romania the closest point would be in Timisoara which is about 500 km from the Moldovan border. However, it was very unlikely that any company would consider it feasible to build a pipeline through Romania, he said. He added that it was questionable as to how Moldovagaz would finance the required construction in Moldova for a connection to Nabucco. South Stream, he added, was even further from Moldova and offered no viable alternative. Moldovagaz had looked at gas storage opportunities in southern Moldova, according to Gusev, and there were some locations and soils that would allow construction of such a facility. However, the prohibitive cost of between USD 100 to USD 150 million to build a two- to three-week gas storage facility for Moldova made this option unrealistic. He noted an alternative would be for Moldova to lease gas storage facilities in Ukraine. However, this option was unacceptable since there would be no means of guaranteeing access to such a supply in a force majeure situation.
7. (C) The lead-up to presidential elections in Ukraine -- which have forced Prime Minister and presidential candidate Tymoshenko to take proactive measures with Moscow -- likely guarantees that gas deliveries from Russia through Ukraine to Moldova will flow freely in the near future. This is good news for Moldovan gas consumers. Nevertheless, the continued deterioration of Soviet-built infrastructure and the lack of alternative sources of energy mean that little has changed. Moldova remains completely dependent on Russian gas and transit disputes are possible in future.